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April 2011

Retailers and Your Zip Code

Have you ever wondered why retailers ask for your zip code when you use a credit card to purchase goods at their store? Sometimes I’ve thought it is to verify who owns the card and sometimes I’ve thought the information might be used to get around our state’s telemarketer “Do Not Call” law.

My question was answered by a February California Supreme Court decision that Williams Sonoma, a retailer of kitchen items, had violated California’s 1971 Credit Card Act by asking for consumers’ zip code numbers to then measure buying habits and to target promotions. According to the court, the store compared consumers’ names and zip codes against a reverse phone directory to locate home addresses. The information was then used to market products to consumers by mail and phone and may have also been sold to other marketers. California’s law prohibits a merchant from requesting or requiring a cardholder’s personal identification information as a condition for accepting the card.

This decision may have a national impact since new consumer lawsuits have been filed against retailers like Best Buy; Coach, Inc; Nordstrom; and Macy’s. I have often been annoyed by Best Buy store clerks asking for zip codes even when I am paying with cash. The complaint may seem minor to some, but frequent readers of these “Consumer Checkpoint” columns will remember earlier warnings about the continuing dangers of identity theft and how retailers have often failed to take effective action to protect credit card information.

The California Supreme Court also noted retailers collect this information to allow them to make telemarketing sales calls to consumers. This is important because retailers can—under state telemarketer “Do Not Call” laws—use this information to argue they have a continuing business relationship with the consumer that exempts them from the law.

I would prefer retailers limit the personal identifying information they collect to only that information necessary to determine the identity of the credit card user since this can be an important part of a retailer’s fraud-prevention efforts. This happens at my local CENEX gas station and this seems reasonable since I don’t have to provide a photo ID to buy gas at the pump. The California Supreme Court ruled such transactions are indeed exempt because the retailer is only trying to verify the credit card is being properly used and is not recording the number.

Next time you shop, ask the retailer if they are required to get your zip code to process the transaction. 

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