BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2011-2012 Regular Session
AB 1219 (Perea)
As Amended June 22, 2011
Hearing Date: July 5, 2011
Fiscal: No
Urgency: No
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SUBJECT
Credit Cards: Personal Information
DESCRIPTION
This bill would create a new exception to existing law's
prohibition against the collection of zip codes during credit
card sales transactions. This bill would permit the collection
of zip code information when a person or entity accepting a
credit card in a sales transaction at a retail motor fuel
dispenser or retail motor fuel payment island automated cashier
uses the zip code information solely for prevention of fraud,
theft, or identity theft.
This bill would provide that it is the intent of the above
amendments to clarify existing law.
BACKGROUND
The Song-Beverly Credit Card Act (Song-Beverly) is "designed to
promote consumer protection" and it "imposes fair business
practices for the protection of the consumers. 'Such a law is
remedial in nature and in the public interest Ýand] is to be
liberally construed to the end of fostering its objectives.'"
(Florez v. Linens N Things, Inc. (2003) 108 Cal.App.4th 447,
450; rev. denied 2003 Cal. LEXIS 5453.) (citations omitted)
Recognizing the protective purpose of Song-Beverly, in February
2011, the California Supreme Court held in Pineda v.
Williams-Sonoma Stores, Inc. (2011) 51 Cal.4th 524 that personal
identification information-as used in the act-includes a
cardholder's zip code information. As a result, a business is
(more)
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in violation of Song-Beverly if it requests a customer's zip
code as a part of a credit card transaction.
According to the sponsors, a number of lawsuits were filed after
the Pineda decision came down. Prior versions of this bill were
broader and applied to all retailers, allowing them to collect
zip code data in specified instances. Because of concerns that
the bill was overly broad and would inadvertently undermine the
strong consumer protections contained in Song-Beverly, the bill
was amended several times in the Assembly and scaled back to its
current form. The bill now would create a new exception to
existing law's prohibition against the collection of zip codes
during credit card sales transactions by permitting the
collection of zip code information when a person or entity
accepting a credit card in a sales transaction at a retail motor
fuel dispenser or retail motor fuel payment island uses the zip
code information solely for prevention of fraud, theft, or
identity theft. Because of pending litigation, the bill would
provide that it is the intent of the above amendments to clarify
existing law.
CHANGES TO EXISTING LAW
Existing law , the Song-Beverly Credit Card Act, places
restrictions on credit card transactions. (Civ. Code Sec. 1747
et seq.)
Existing law provides that no person or entity that accepts
credit cards for the transaction of business shall do any of the
following:
request, or require as a condition to accepting the credit
card as payment for goods or services, the cardholder to write
any personal identification information on the credit card
transaction form; or
request, or require as a condition of accepting the credit
card as payment for goods or services, the cardholder to
provide personal identification information, which the person
or entity accepting the credit card writes, causes to be
written, or otherwise records upon the credit card transaction
form;
utilize a credit card form which contains preprinted spaces
specifically designated for filling in the cardholder's
personal identification information. (Civ. Code Sec.
1747.08(a).)
Existing law provides the following exemptions from the above
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restrictions:
if the credit card is being used as deposit to secure payment
in the event of default, loss, damages, or similar occurrence;
cash advance transactions; or
if the person or entity accepting the credit card is
contractually obligated to provide personal identification
information in order to complete the credit card transaction
or is obligated to collect and record the personal
identification information by federal law or regulation;
if the personal identification information is required for a
special purpose incidental but related to the individual
credit card transaction, including, but not limited to,
information relating to shipping, delivery, servicing, or
installation of the purchased merchandise, or for special
orders. (Civ. Code Sec. 1747.08(c).)
Existing law defines "personal identification information" as
information concerning the cardholder, other than information
set forth on the credit card, and including, but not limited to,
the cardholder's address and telephone number. (Civ. Code Sec.
1747.08(b).) Existing case law has interpreted this definition
to include the cardholder's zip code. (Pineda v.
Williams-Sonoma Stores, Inc. (2011) 51 Cal.4th 524.)
This bill would create a new exception to the above, thus
permitting the collection of zip code information when a person
or entity accepting a credit card in a sales transaction at a
retail motor fuel dispenser or retail motor fuel payment island
automated cashier uses the zip code information solely for
prevention of fraud, theft, or identity theft.
This bill would provide that it is the intent of the above
amendments to clarify existing law.
COMMENT
1. Stated need for the bill
The author writes:
Song-Beverly Credit Card Act limits when a retailer or other
entity that accepts credit cards can collect additional
personal identification information (PII) from a customer. In
the recent California Supreme Court decision of Pineda v.
Williams-Sonoma Stores, Inc. . . . zip code data was found
to be PII based on the facts of the case. AB 1219 would
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clarify existing law that the use of zip code data for the
purpose of fraud prevention is appropriate and not a violation
of the law.
Since February, the Pineda decision has had serious unintended
consequences and resulted in over 150 class action suits filed
against retailers in California. Unfortunately, a significant
portion of these suits were brought upon companies, including
fuel retailers, who had been collecting zip codes in an effort
to protect consumers. Without clarification many fuel
retailers may face years of costly litigation.
The sponsor of this measure, the Western States Petroleum
Association (WSPA) writes that the bill:
. . . assures the continued ability of California drivers to
use credit cards for fuel purchases at the pump. AB 1219, as
amended, would clarify existing law that the use of zip code
data for fuel purchases at the pump for the purpose of fraud
prevention is appropriate. . . . as a result of the ÝPineda]
decision, many additional lawsuits have been filed asserting
that use of zip code data in a variety of contexts is
inappropriate. We are asking the legislature to clarify the
statute in order to continue a vital protection of consumers
and patrons of WSPA member companies.
Class action lawsuits have been filed against WSPA member
companies for their collection of zip code information at
service stations. Many other fuel retailers, especially
small-business operators, are concerned that they too will be
targeted. The zip code data is requested during credit card
transactions at the pump for the sole purpose of fraud
prevention. This information is never used for marketing
purposes.
2. The California Supreme Court's decision in Pineda v.
Williams-Sonoma Stores, Inc.
As described above, in February 2011, the California Supreme
Court held in Pineda v. Williams-Sonoma Stores, Inc. (2011) 51
Cal.4th 524 that personal identification information-as used in
Song-Beverly-includes a cardholder's zip code information. As a
result, a business is in violation of Song-Beverly if it
requests a customer's zip code as a part of a credit card
transaction.
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In Pineda, the plaintiff made a purchase at Williams-Sonoma and,
when the cashier asked for her zip code, the plaintiff provided
it because she believed that it was necessary to complete the
transaction. The cashier entered the plaintiff's zip code into
the electronic cash register and, as a result, at the end of the
transaction, Williams-Sonoma had the plaintiff's name, credit
card number, and zip code in its database. Using computer
software, Williams-Sonoma then performed reverse searches from
databases containing millions of names, addresses, email
addresses, and telephone numbers. That software then matched
the plaintiff's name and zip code with her address, which had
not been disclosed by the plaintiff. The plaintiff's complete
information was then stored in Williams-Sonoma's database and
the company used it to "market products to customers and may
also sell the information it has compiled to other businesses."
(Pineda v. Williams-Sonoma Stores, Inc. 51 Cal.4th at 528.)
In holding that a zip code, without more, constitutes "personal
identification information" under Song-Beverly, the California
Supreme Court noted that the definition includes the
cardholder's address. The question then, according to the
Court, is whether the Legislature intended that components of an
address be included. On that point, the Court stated, "Ýt]he
answer must be yes. Otherwise, a business could ask not just
for a cardholder's ZIP code, but also for the cardholder's
street and city in addition to the ZIP code, so long as it did
not also ask for the house number. Such a construction would
render the statute's protections hollow. Thus, the word
"address" in the statute should be construed as encompassing not
only a complete address, but also its components." (Id. at 531.)
In addition, the Court noted that the lower court ruling siding
with Williams-Sonoma would "permit retailers to obtain
indirectly what they are clearly prohibited from obtaining
directly, 'end-running' the statute's clear purpose. This is so
because information that can be permissibly obtained under the
Court of Appeal's construction could easily be used to locate
the cardholder's complete address or telephone number. Such an
interpretation would vitiate the statute's effectiveness." (Id.
at 533.)
The rationale for protecting consumers' personal identification
information in these instances has not changed over the years.
The Court cited this Committee's analysis of AB 2920 (Areias,
Ch. 999, Stats. 1990) which added the original restriction on
collection of personal identification information and noted
"'The Problem Ý] ? Ý] Retailers acquire this additional
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personal information for their own business purposes-for
example, to build mailing and telephone lists which they can
subsequently use for their own in-house marketing efforts, or
sell to direct-mail or tele-marketing specialists, or to
others.' (Sen. Com. on Judiciary, Analysis of Assem. Bill No.
2920 (1989-1990 Reg. Sess.) as amended June 27, 1990, pp. 3-4.)"
(Id. at 534.)
After reviewing the legislative history of Song-Beverly, the
Court found that the history "demonstrates the Legislature
intended to provide robust consumer protections by prohibiting
retailers from soliciting and recording information about the
cardholder that is unnecessary to the credit card transaction."
After determining that zip code information is personal
identification information for purposes of Song-Beverly, the
Court expressly rejected the defendant's argument that the
decision should apply only on a prospective basis because
retailers had previously assumed that a zip code was not
personal identification information. Noting that it was "not
persuaded," the court stated that the statute provided
constitutionally adequate notice of the proscribed conduct.
(Id. at 536.)
3. Bill would directly impact pending litigation
According to the sponsor, a class action lawsuit has been filed
against WSPA member companies alleging a violation of
Song-Beverly for their collection of zip code information at
fuel pumps. In response to Committee staff inquiries, the
author provided the Committee with a copy of a complaint filed
in Los Angeles Superior Court in February 2011 against "Chevron
Corporation, ConocoPhillips Company, ExxonMobil Oil Corporation,
Shell Oil Company, Tesoro Refining and Marketing Company, and
Thrifty Oil Co." That complaint alleges that the defendant
gasoline companies required the plaintiff to enter his zip code
information into an electronic terminal as a condition of
payment in violation of Song-Beverly. At this point, a status
conference in the case is scheduled for August 12, 2011.
By expressly creating a new exception to existing law's
prohibition against the collection of zip codes during credit
card sales transactions, this bill is intended-by the author and
sponsor's admission-to affect the above litigation. The bill
would thus permit the collection of zip code information when a
person or entity accepting a credit card in a sales transaction
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at a retail motor fuel dispenser or retail motor fuel payment
island automated cashier uses the zip code information solely
for prevention of fraud, theft, or identity theft. In order to
specifically affect the pending case, the bill would provide
that it is the intent of the above amendments to clarify
existing law.
In the past, this Committee has raised concerns about bills
which interfere with pending litigation. Any such interference
could result in a direct financial windfall to a private party,
prevent a court from deciding an action based upon the laws in
place at the time the cause of action accrued, or create a
situation where the Legislative branch is used to circumvent the
discretion and independence of the Judicial branch.
As a result, the Committee should consider amending this bill to
provide that its application is prospective only. In that way,
the bill would not affect the litigation that is currently
pending. The following amendment would address this:
On page 6, line 4, after the period insert "This subparagraph
shall apply only to actions filed on or after January 1,
2012."
IS IT APPROPRIATE FOR THE LEGISLATURE TO INTERFERE IN PENDING
LITIGATION? IF NOT, SHOULD THIS BILL BE AMENDED TO MAKE ITS
APPLICATION PROSPECTIVE ONLY?
4. The practices covered by this bill may already be permissible
under existing law
This bill would create a new exception to existing law's
prohibition against the collection of zip codes during credit
card sales transactions by permitting the collection of zip code
information when a person or entity accepting a credit card in a
sales transaction at a retail motor fuel dispenser or retail
motor fuel payment island automated cashier uses the zip code
information solely for prevention of fraud, theft, or identity
theft. According to the sponsor, the zip code information goes
to the issuing bank to verify the credit card and the gas
station also records the number and retains it in order to
reconcile the transaction.
Sponsor Western States Petroleum Association asserts that,
because of pending litigation against its member companies, it
is "asking the legislature to clarify the statute in order to
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continue a vital protection of consumers and patrons of WSPA
member companies."
However, it may be the case that such a "clarification" is not
needed given that existing law already provides an exemption if
the person or entity accepting the credit card is contractually
obligated to provide personal identification information in
order to complete the credit card transaction. In the case of
gas stations, the sponsor indicates that in some cases there may
be a contractual requirement that the gas station collect a
customer's zip code. But it is more likely, according to the
sponsor, that there is no contractual requirement and instead
the issuing bank grants the gas station preferential pricing if
it collects a customer's zip code to verify the transaction.
5. Clarifying amendments
The author has agreed to the following clarifying amendments:
On page 6, line 1, delete "the personal identification" and
insert "zip code"
On page 6, line 2, delete "or uses the personal information"
On page 6, delete lines 3 and 4
On page 7, line 32, delete "for the purposes"; delete line 33
and insert "solely for the prevention of fraud, theft, or
identity theft as provided under subdivision (c)(3)(B)"
Support : California Manufacturers and Technology Association
Opposition : None Known
HISTORY
Source : Western States Petroleum Association
Related Pending Legislation : None Known
Prior Legislation : None Known
Prior Vote :
Assembly Floor (Ayes 75, Noes 1)
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Assembly Judiciary Committee (Ayes 8, Noes 0)
Assembly Banking and Finance Committee (Ayes 11, Noes 0)
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