Court Punts Case Over Retail Zip Code Demand

(CN) - Whether retailers can request customer zip codes after processing and returning the credit cards they used as payment is up to California's highest court, the 9th Circuit said.

Tammie Davis had originally filed her 2011 class action against Devanlay Retail Group in Placer County Superior Court.

She says that she was placing her credit card back in her purse at the Devanlay store where she was shopping when a cashier asked for the zip code.

Though Davis does not recall whether she had yet received her receipt, she alleged that the zip-code demand violated the Song-Beverly Credit Card Act, a California law that "prohibits businesses from requesting that cardholders provide 'personal identification information' during credit card transactions, and then recording that information."

Devanlay removed the action to federal court, the Eastern District of California, in 2011. A year later, that court granted Devanlay, a licensee for Lacoste apparel, summary judgment based on the finding that "Devanlay's policy of waiting until the customer has her receipt in hand conveys that the transaction has concluded and that providing a zip code is not necessary to complete the transaction."

Davis appealed the decision to the 9th Circuit, but a three-judge panel found Tuesday that it lacks precedent to determine whether it is a violation of the statute to request personal identification information (PII) from customers immediately after they have completed a credit card transaction.

The federal appeals court certified the matter to the California Supreme Court, asking whether "section 1747.08 of the California Civil Code prohibit[s] a retailer from requesting a customer's personal identification information at the point of sale, after a customer has paid with a credit card and after the cashier has returned the credit card to the customer, if it would not be objectively reasonable for the customer to interpret the request to mean that providing such information is a condition to payment by credit card."

Several federal courts in California have interpreted Song-Beverly to prohibit a retailer from requesting personal information only if a consumer would perceive the request to mean the information was necessary to complete the transaction, according to the ruling.

Davis argues, however, that the statute forbids retailers from asking for the information at the point of sale when a customer pays by credit card, regardless of whether a customer would reasonably perceive it as a condition of payment by credit card.

The California Supreme Court has yet to weigh in on the issue.

"We find support for both the district court's and the appellant's interpretations in the decisions of California's Courts of Appeal, as well as in the statute's language and legislative history," Tuesday's unsigned order states.

Gene Stonebarger, an attorney for Davis, noted in an interview that the law at issue, Section 1747.08 of the Song-Beverly Credit Card Act was enacted to prevent conduct that "puts consumers at risk of harassment by cashiers and identity theft."

"The protections of the statute are more important now than ever in light of the always increasing advances in information technology allowing retailers to stockpile personal identification information and credit card information about their customers, which are often subject to mass data breaches," Stonebarger added.

The appellate panel featuring Judges Consuelo Callahan, Milan Smith and Paul Watford called the language of the statute ambiguous and said it offers little guidance as to whether courts should apply an objective-consumer-perception test.

Song-Beverly states that "businesses that accept credit cards shall not '[r]equest, or require as a condition to accepting the credit card as payment in full or in part for goods or services, the cardholder to provide personal identification information."

The panel took issue with the clause that says "as a condition to accepting the credit card as payment."

They said that the comma after "request" makes it unclear whether the clause modifies "request" in addition to modifying "require."

"If it does modify 'request,' this would support the appellee's position that Song-Beverly only forbids a request for PII if the request could lead a consumer to reasonably believe that providing PII is a condition to payment by credit card," the order states. "If the clause does not modify 'request,' the plain meaning of the statute would appear to broadly prohibit a retailer from requesting PII when a customer pays by credit card."

Because it is unclear whether district courts are correctly applying California law in construing the statute, "we think it appropriate that the state court of last resort be given an opportunity to resolve the question in the first instance," the panel said.

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