BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 1219| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 1219 Author: Perea (D) Amended: 9/1/11 in Senate Vote: 27 - Urgency SENATE JUDICIARY COMMITTEE : 5-0, 8/25/11 AYES: Evans, Harman, Blakeslee, Corbett, Leno ASSEMBLY FLOOR : 75-1, 6/3/11 - See last page for vote SUBJECT : Credit cards: personal information SOURCE : Western States Petroleum Association DIGEST : This bill creates a new exception to existing law's prohibition against the collection of zip codes during credit card sales transactions. This bill permits 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. ANALYSIS : Existing law, the Song-Beverly Credit Card Act, places restrictions on credit card transactions. (Civil Code ÝCIV] Section 1747 et seq.) Existing law provides that no person or entity that accepts credit cards for the transaction of business shall do any CONTINUED AB 1219 Page 2 of the following: 1. 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 2. 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; 3. Utilize a credit card form which contains preprinted spaces specifically designated for filling in the cardholder's personal identification information. (CIV Sec. 1747.08(a)) Existing law provides the following exemptions from the above restrictions: 1. If the credit card is being used as deposit to secure payment in the event of default, loss, damages, or similar occurrence; 2. Cash advance transactions; or 3. 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; 4. 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 Sec. 1747.08(c)) Existing law defines "personal identification information" as information concerning the cardholder, other than CONTINUED AB 1219 Page 3 information set forth on the credit card, and including, but not limited to, the cardholder's address and telephone number. (CIV 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 creates 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 states that this act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are: In order to prevent potential disruption of gasoline station services throughout the state, it is necessary to create a new exception to the prohibition on the collection of zip code information when credit cards are used that will apply in the purchase of gasoline and that will be implemented immediately. 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 CONTINUED AB 1219 Page 4 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. According to the sponsor, 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 this bill was overly broad and would inadvertently undermine the strong consumer protections contained in Song-Beverly, this bill was amended several times in the Assembly and scaled back to its current form. This bill now creates 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. In order to avoid affecting pending litigation, this bill takes effect on a prospective basis. 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. 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 CONTINUED AB 1219 Page 5 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 the Senate Judiciary Committee's analysis of AB 2920 (Areias), Chapter 999, Statutes 1990, which added the original restriction on collection of personal identification information and noted "'The Problem Ý] ? Ý] Retailers acquire this additional personal information for their own business purposes-for example, to build mailing and telephone lists which they CONTINUED AB 1219 Page 6 can subsequently use for their own in-house marketing efforts, or sell to direct-mail or tele-marketing specialists, or to others.' (Senate Judiciary Committee's analysis of AB 2920, Ý], 1989-90 Session, 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.) FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local: No SUPPORT : (Verified 9/1/11) Western States Petroleum Association (source) California Manufacturers and Technology Association ARGUMENTS IN SUPPORT : 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. . . . 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 CONTINUED AB 1219 Page 7 these suits were brought upon companies, including fuel retailers, who had been collecting zip codes in an effort to protect consumers." The sponsor of this bill, the Western States Petroleum Association (WSPA) writes that this bill: ". . . assures the continued ability of California drivers to use credit cards for fuel purchases at the pump. . . . 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." ASSEMBLY FLOOR : 75-1, 6/3/11 AYES: Achadjian, Alejo, Allen, Atkins, Beall, Bill Berryhill, Block, Blumenfield, Bonilla, Bradford, Brownley, Buchanan, Butler, Charles Calderon, Campos, Cedillo, Chesbro, Conway, Cook, Davis, Dickinson, Donnelly, Eng, Feuer, Fletcher, Fong, Fuentes, Furutani, Beth Gaines, Galgiani, Garrick, Gatto, Gordon, Grove, Hagman, Halderman, Hall, Harkey, Hayashi, Hill, Huber, Hueso, Huffman, Jeffries, Jones, Knight, Lara, Logue, Bonnie Lowenthal, Ma, Mansoor, Mendoza, Miller, Mitchell, Monning, Morrell, Nielsen, Norby, Olsen, Pan, Perea, V. Manuel Pérez, Portantino, Silva, Skinner, Smyth, Solorio, Swanson, Torres, Valadao, Wagner, Wieckowski, Williams, Yamada, John A. Pérez NOES: Ammiano NO VOTE RECORDED: Carter, Gorell, Roger Hernández, Nestande RJG:kc 9/1/11 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED AB 1219 Page 8 CONTINUED