Consumers sue retailers over ZIP Code queries
Consumers are hoping to cash in on last week’s state Supreme Court ruling that it’s illegal for retailers to ask customers for their ZIP Codes during credit card transactions, except in limited cases.
More than a dozen new lawsuits have been filed against major chains that do business in California, including Wal-Mart Stores Inc., Bed Bath & Beyond Inc., Crate & Barrel and Victoria’s Secret. More filings are expected in the coming weeks.
The flurry of litigation stems from a decision last week against Williams-Sonoma Inc. in which the state high court ruled unanimously that ZIP Codes were “personal identification information” that merchants can’t demand from customers under a California consumer privacy law.
That decision sparked lawsuits, mostly in San Francisco and Los Angeles courts, that seek class-action status and compensation for affected shoppers.
Father-and-son legal team Edwin and Eric Schreiber, who filed two of the lawsuits — against Bed Bath & Beyond and Crate & Barrel — said they took on the cases because of the invasion of privacy that consumers were subjected to when asked for their ZIP Codes.
“A lot of the people we talked to felt very uncomfortable giving the ZIP Code but felt they had to,” Eric Schreiber said. “They felt they were in the middle of a transaction and weren’t going to tell the sales clerk no.”
Merchants typically use ZIP Codes to determine where their customers live and for other marketing purposes. But beyond that, the information could lead to credit card fraud and identity theft, said Gene J. Stonebarger, a lawyer for a woman whose lawsuit triggered the Williams-Sonoma ruling.
“Customers are deceived into providing their information under the false pretense that it’s required to complete the credit card transaction,” Stonebarger said. “Individuals don’t understand the scope of the information that they’re revealing. Most people don’t appreciate that their ZIP Codes combined with their names can be used to obtain very personal information about them.”
Stonebarger said he was also preparing to file several lawsuits against other major retailers, including a home furnishings giant and a luxury handbag seller.
“The precedential effect is crystal clear,” he said of the Williams-Sonoma ruling.
Several retailers were caught off guard Tuesday, with many declining to comment because they hadn’t been served with complaints yet or because they didn’t want to discuss pending litigation.
A spokeswoman for Limited Brands Inc., the parent company of Victoria’s Secret, said the company had stopped asking for customers’ ZIP Codes at least five years ago.
Wal-Mart spokeswoman Tiffany Moffatt said the discount giant was “reviewing the ruling now to determine its impact.”
In the Williams-Sonoma case, the retailer had argued that ZIP Codes did not divulge personal information because they pertained to a group, not an individual. It also said that an adverse ruling should be applied only to future cases because the penalties could be ruinous and the law was vague.
Two lower courts rejected the suit, but the state Supreme Court said a ZIP Code was part of a person’s address and therefore covered by the state’s 1971 Credit Card Act.
However, the ruling still allows ZIP Codes to be collected under certain circumstances, such as at gas station pumps where the information is requested for security reasons and in transactions that involve shipping. And retailers may still ask consumers to produce a driver’s license for identification purposes but may not record the personal information on it.
The case was sent back to the lower court for further proceedings. State law sets a maximum $250 for the first violation and $1,000 for each further violation, exposing retailers to potentially millions of dollars in liability. The amount of penalties awarded would be determined by a judge.