Money

Asking for Your ZIP Code: A New No-No for Retailers?

By Marlys Harris

Updated on: March 3, 2011 / 10:19 AM EST / MoneyWatch

Privacy is something that I have pretty much given up on. Maybe that's why I don't go ballistic (or even mildly nuts) when a store clerk taking my credit card requests my ZIP code. After all, my relatives have made dozens of unflattering photos of me available to the entire world via Facebook, and every time I visit the doctor, the receptionist demands my birthdate (complete with year) within hearing of twenty or so fellow patients.

Like me, you may still have to live down the hairdo you wore in 1986, and bunches of strangers knowing your age. But you don't have to tell merchants your ZIP code, at least not in California. Last week, the state's Supreme Court ruled that it is illegal for retailers to demand ZIPs during a credit card transaction.

The case began when Jessica Pineda was asked for her ZIP code by a clerk at Williams-Sonoma when she charged a purchase to her credit card. She provided the information because she assumed it was necessary to complete the transaction -- although her lawyer, Gene L. Stonebarger concedes that the store probably would have accepted her card even if she had kept her lip ZIPped. Her lawsuit contends that Williams-Sonoma used the info to find her address which it could in turn use to market its products and to sell to other retailers.

This seems like a small offense to fuss about. True, there is the nuisance of receiving gazillions of catalogs. But you can opt out of most such solicitations by registering with the Direct Marketing Association's Mail Preference Service. (Go to www.dmachoice.org.) Being part of anybody's database does open you to the risk, albeit a tiny one, that your information could be part of a wholesale data theft and ultimately used to steal your identity.

Most important, stores have some nerve being so nosy.

None of that matters, however, because California's credit card law out-and-out forbids the collection of personal identification information. And, because a ZIP code can be used to retrieve an address, the court ruled that it is personal, even though thousands of other people share it. A clerk can ask to see a driver's license for identification, but under the law, s/he may not record any of the information. (There are exceptions: a gas station can ask for a ZIP code with a credit transaction to allow the bank to check that the cardholder is legit; and, of course, if you're having a purchase shipped, you have to provide the ZIP. Duh.)

The case now goes back to the trial court where Stonebarger plans to ask for class action certification. If he gets it, Williams-Sonoma, depending on the discretion of the judge, might have to pay fines -- a maximum of $250 for the first violation and $1,000 for each subsequent violation -- within a year of the date when the case was filed. Pineda and her lawyers would collect the booty. Sniffing a lucrative payday, lawyers across California have filed cases against Bed Bath & Beyond, Crate & Barrel, Walmart and Victoria's Secret. Stonebarger says he also has new cases in the works. It's hard to believe that a judge would award much of anything since two lower courts ruled for Williams-Sonoma, saying that a ZIP code was general information. If the issue needs that much interpretation, how would a company necessarily have known it was breaking the law by asking for a ZIP code?

Nevertheless, ZIP code lawsuits could spread. Ten other states plus the District of Columbia have laws on the books that restrict the information stores can ask for when accepting credit cards. Some are pretty specific, barring collection only of telephone numbers and addresses. Others are, like California's, are pretty broad. Massachusetts and New Jersey, for example, block collection of any personal identification information. Whether a ZIP code is that personal, however, remains unclear. "I'm sure class action lawyers will be out there looking," says Paul Stephens, director of policy and advocacy for the Privacy Rights Clearinghouse. Whether they'll sue, of course, depends partly on the size of the fines they and their clients would stand to collect. Still, he adds that merchants in such states may become pretty cautious about pestering customers about their ZIP codes.

Meanwhile, can you refuse to provide such information? You betcha. In all practicality, few merchants in this economy are going to stop a sale because they couldn't get a ZIP code. More important, both Visa and MasterCard say that merchants can ask for identification. But if consumers refuse to provide it, the store must still honor their credit cards. That policy is "largely disregarded," says Stephens.

So instead of relying on class action lawyers, maybe we consumers should put some pressure on the two payment networks to enforce their own policies. Next time a store clerk asks for your address, your phone number, your ZIP code or your vaccination certificate before allowing you to use your plastic, say "no" and let MasterCard and Visa hear about it. Feel free to name names.