BILL ANALYSIS Ó AB 1219 Page 1 REPLACE : 09/08/11 Changes per consultant. CONCURRENCE IN SENATE AMENDMENTS AB 1219 (Perea) As Amended September 1, 2011 2/3 vote. Urgency ----------------------------------------------------------------- |ASSEMBLY: |75-1 |(June 3, 2011) |SENATE: |35-0 |(September 7, | | | | | | |2011) | ----------------------------------------------------------------- Original Committee Reference: B. & F. SUMMARY : Provides clarification for those instances when an entity that accepts credit cards may not request certain types of personal identification information (PII) to complete the transaction. Specifically, this bill creates an express exemption from the prohibition against the collection and retention of zip code information when the zip code is used solely for prevention of fraud, theft, or identify theft in a sales transaction at a retail motor fuel dispenser or retail motor fuel payment island automated cashier. The Senate amendments provide for a definition of "retail motor fuel dispenser" and "retail motor fuel payment island automated cashier" to provide clarification of instances when zip code information may be requested to complete a credit card transaction. The amendments also add an urgency clause. EXISTING LAW : 1)Provides that under the Song-Beverly Credit Card Act of 1971 (Credit Card Act) (Civil Code Section 1747 et seq.), no person, firm, partnership, association or corporation that accepts credit cards shall do any of the following: a) Require, or request, as condition of accepting the credit card, the cardholder to write any PII identification information upon the credit card transaction form or other document ÝSection 1747.08a(1)]; b) Require, or request, as a condition of accepting the credit card, the cardholder to provide PII identification information which the entity accepting the card would then AB 1219 Page 2 write or record upon the credit transaction form or otherwise ÝSection 1747.08a(2)]; or, c) Utilize in any credit card transaction, a credit card form that contains preprinted spaces for PII identification information of the cardholder ÝSection 1747.08a(3)]. 2)Specifies that the prohibitions in a), b), and c) above do not apply under the following circumstances: a) If the credit card is being used as a deposit to secure payment in the event of default, loss, damage, or other similar occurrence ÝSection 1747.08(1)]; b) Cash advance transactions ÝSection 1747.08(2)]; c) If the entity requesting the information is contractually obligated to provide the PII information in order to complete the transaction, or is obligated to collect and record the PII identification information by federal law or regulation ÝSection 1747.08(3)]; or, d) If PII 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 ÝSection 1747.08(4)]. 3)Clarifies that the prohibitions on collecting PII identification information relating to the credit card transaction does not prohibit a requirement that the cardholder provide reasonable forms of positive identification, including a driver's license or California State identification card, or another form of identification ÝSection 1747.08(4)d]. 4)Specifies that if the cardholder pays for the transaction with a credit card number and does not make the credit card available upon request to verify the number, the cardholder's driver's license number or identification card number may be recorded on the credit card transaction form ÝSection 1747.08(4)d]. 5)Defines "PII" as information concerning the cardholder, other AB 1219 Page 3 than information set forth on the credit card, and including but not limited to, the cardholder's address and telephone number ÝSection 1747.08(3)b]. AS PASSED BY THE ASSEMBLY , the bill was substantially similar to the bill currently under consideration. FISCAL EFFECT : None COMMENTS : The need for this bill arises from Pineda v. Williams-Sonoma Stores, Inc., (2011) 51 Cal.4th 524, in which the California Supreme Court ruled that a consumer's ZIP code is PII under the Credit Card Act, and as such, falls under the restricted uses contained within the statute. Prior to addressing how this bill would address this issue, it is important to provide background on the case. Pineda v. Williams-Sonoma Stores, Inc . The plaintiff sued retailer Williams-Sonoma Stores, Inc., claiming the retailer violated the Credit Card Act during a transaction in which a cashier at the retailer asked the plaintiff for her ZIP code. The plaintiff complied with the request, believing her ZIP code was necessary for completing the transaction. Subsequently, the defendant used computer software to conduct reverse searches and cross checks against databases that contain millions of names, email address, telephone numbers, and street addresses. Using the software, the defendant was able to match the name and ZIP code of the plaintiff to match with her address which was then retained in the defendant's own database used for marketing purpose. Additionally, such information was also sold by the defendant to other businesses. The plaintiff filed a class action alleging that the retailer had violated the Credit Card Act. The trial court and court of appeal agreed with the defendant that the ZIP code does not constitute PII. The California Supreme Court agreed to take up the issue. The Court concluded that under the Credit Card Act, PII does include the ZIP code. The Court concluded that because address is a sum of its parts (i.e., name, street, city, ZIP code) in that the ZIP code "is readily understood to be part of an address; when one addresses a letter to another person, a ZIP code is always included. The question then is whether the Legislature?intended to include components of the address. The answer must be yes." AB 1219 Page 4 Additionally, the Court also found that the broad language used in the statute demonstrated that the Legislature intended the statute to be interpreted broadly. Discussion . In the Pineda case, the retailer was collecting ZIP codes for marketing purposes and potentially for sale to other businesses. However, the Supreme Court did not address uses of ZIP codes for what could be described as more legitimate purposes. Specifically, ZIP codes are also used for fraud prevention purposes, or at a basic level, as part of the shipping address for an online internet transaction. This bill simply creates an express exemption in current law from the prohibition on collecting zip code information in a retail credit card transaction at a motor fuel dispenser so long as the zip code information is used to prevent fraud, theft or identity theft. While the courts may determine in current litigation, in response to the Pineda case, that such an exemption always existed, this bill creates an express exemption. Analysis Prepared by : Mark Farouk / B. & F. / (916) 319-3081 FN: 0002847