BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



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          |SENATE RULES COMMITTEE            |                  AB 1219|
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                                 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 
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          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 

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          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 

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          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 

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          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 

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          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 

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            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

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