The Song-Beverly Credit Card Act of 1971, set forth in California Civil Code § 1747 et seq., was designed to protect consumers. As part of that protection, California Civil Code §1747.08(a) prohibits businesses from requesting and recording a customer's "personal identification information" during a credit card transaction. California Civil Code §1747.08(b) 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 card holder's address and telephone number." In Pineda v. Williams-Sonoma Stores, Inc. (Cal. Sup. Ct. Feb. 11, 2011), the California Supreme Court was asked to decide whether California Civil Code §1747.08 is violated when a business requests and records a customer's ZIP Code during a credit card transaction. The California Supreme Court held that it was violated.

In Pineda, the California Supreme Court held that Williams-Sonoma's practice of collecting ZIP Code information during a credit card purchase transaction constituted the acquisition of "personal identification information" and therefore violated California Civil Code §1747.08 (the Song-Beverly Credit Card Act of 1971). According to the Supreme Court, the purchaser's ZIP Code was unnecessary for the transaction and could be used to violate a person's privacy, namely by matching the customer's name and the Zip Code in a database to obtain the customer's previously undisclosed full mailing address. The retailer could then either sell the information obtained, or use the information for direct marketing.

In sum, California retailers are, in most circumstances, precluded from recording any of the customer's personal information, unless necessary for security or shipping purposes. Despite the Supreme Court's ruling in Pineda, Retailers should be aware that they are still allowed to ask a customer to show their driver's license for proof of identification (they just can't record, or swipe, the information!). Retailers should also note that the Song-Beverly Credit Card Act of 1971 does not apply to Internet, telephone and mail order transactions.

The Supreme Court has sent the Pineda case back to the trial court basically to determine the damages. The Song-Beverly Credit Card Act of 1971 provides for a civil penalty of $250 for the first violation, and a $1,000 civil pensalty for each subsequent violation, plus attorney's fees and costs. Class action attorneys have recently filed law suits against 20 retailers, including Tiffany & Co., Target, Walmart, Victoria's Secret, Bed Bath & Beyond Inc., and Crate & Barrel over their zip code policy, and more are expected.