BILL ANALYSIS Ó
AB 844
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Date of Hearing: May 24, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 844 (Dickinson) - As Amended: May 1, 2013
Policy Committee: JudiciaryVote:7-3
Banking and Finance 8-3
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill extends certain restrictions of the Song-Beverly Act
to debit cards and also extends the Act to cover online
retailers that accept credit cards or debit cards for payment of
online purchases, subject to certain exceptions. Specifically,
this bill:
1)Applies the existing provisions in law regulating the issuance
and use of credit cards and the respective rights and
responsibilities of cardholders and retailers to debit cards.
2)Extends existing law generally prohibiting businesses from
requesting or requiring consumers to provide unnecessary
personal identification information during a credit card
transaction to on-line transactions.
3)Directs the operator of an online site to destroy or dispose
of the personal identification if it is no longer needed for
the prevention of fraud, theft or identify theft. Prohibits
sharing of such information with other operators.
4)Exempts from these requirements circumstances where the credit
or debit cardholder maintains an account with the merchant.
FISCAL EFFECT
Compliance costs for state agencies in the hundreds of thousands
of dollars.
COMMENTS
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1)Purpose. According to the author, AB 844 increases consumer
privacy while also ensuring appropriate fraud and identity
theft protection. The author states that in the Apple
decision, the Court pointed out that the Song-Beverly Credit
Card Act had not kept pace with emerging technologies.
Moreover, the author notes, in recent years debit cards have
become the functional equivalent of credit cards, containing
credit card company logos and often used to purchase goods
without need of entering a PIN number. According to the
author, this equivalency creates similar security concerns and
argues for extending Song-Beverly. The author believes AB 844
attempts to find the right balance between protecting
merchants from losing money to fraud and shielding shoppers
from unnecessary intrusions into their privacy.
2)Support . The Consumer Attorneys of California contend the
California Supreme Court's Apple decision, holding that the
Song-Beverly Act did not apply to online transactions, was
wrongly decided. The decision allows online retailers to
continue to require consumers to provide personal data, such
as home addresses and/or phone numbers, and to verify their
credit cards when purchasing products online. The Consumer
Attorneys also believe AB 844 is a proper response to the
Apple decision and that it will provide consumers with greater
protection against identity theft and financial fraud.
3)Opposition . The opposition coalition, including the Chamber
of Commerce and the California Retailers Association, contends
this bill will make it more difficult for online business to
prevent fraud and identify theft, especially since online
transaction lacks the face-to-face human interaction that can
verify the physical presence of a card and the identification
of the person submitting it. Opponents also argue that fraud
prevention in the online world is based on a variety of
factors, so a one-size-fits-all limitation of what information
is appropriate for fraud prevention purposes cannot
accommodate these critical considerations that can vary from
company to company.
The California Bankers Association (CBA) opposes this bill for
some of the same reasons, but, CBA is focused on confusion
that may result from extending Song-Beverly to debit cards.
Song-Beverly was enacted, according to CBA, not only to
protect consumer privacy, but also to protect consumers from
liability for fraudulent transactions, billing errors and
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unlawful surcharges. Debit card protections, the CBA points
out, are established in a different title separate from
Song-Beverly. By adding debit cards into Song-Beverly, the
bill could create compliance confusion for debit card issuers.
CBA also contends credit cards and debit cards are different
payment instruments; debit cards are access devices for
transaction accounts and do not involve the extension of
credit. CBA notes other problems with the bill as well,
including its failure to adequately account for situations in
which the consumer has an established relationship with the
business, and the extension of the requirements to affiliates
of the online business.
4)Background . AB 844 is in response to a recent court decision,
Apple v Superior Court of Los Angeles County (Krescent)
S199384 (February 04, 2013). In Apple, the California Supreme
Court opined that the state's statutory protection against the
collection of personal identification information when making
credit card purchases does not apply to online retailers of
electronically downloadable products. The Court found the
statute and its anti-fraud provisions had been designed for
brick and mortar transactions and the law pre-dated the
Internet era and the explosion of e-commerce,
In another relevant case, in 2011 the California Supreme Court
confronted the question of what constitutes personal
identification information under the Song-Beverly Credit Card
Act in Pineda v. Williams- Sonoma Stores, Inc. (2011) 51 Cal.
4th. 524. In Pineda, a customer sued a retailer claiming it
violated the provisions of the Song-Beverly Act when a store
clerk asked the customer for a zip code during the credit card
transaction. The customer subsequently learned that the
retailer used this information to locate the customer's home
address. The California Supreme Court held the word "address"
in the statute means either a complete address or any portion
of an address, and a zip code is part of an address.
5)Song Beverly . The underlying statute, the Song Beverly Credit
Card Act passed in 1990, generally prohibits businesses from
requesting or requiring consumers to provide unnecessary
personal identification information during a credit card
transaction. At the time Song-Beverly was enacted, debit
cards, to the extent that they existed at all, were limited to
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use at automated teller machines to draw money from a bank
account.
6)Scope of bill . This bill may not apply to many online
transactions. The Commerce Clause of the U.S. Constitution
authorizes Congress to regulate commerce with foreign nations,
and among the states. The U.S. Supreme Court has held that
the "negative" or "dormant" Commerce Clause, which is an
inference drawn from the Commerce Clause, prohibits states
from enacting laws that unduly burden or discriminate against
interstate commerce. If states are allowed to enact their own
privacy laws that apply beyond state lines, retailers would
have to comply with 50 different privacy laws, a situation
that would surely raise concerns and litigation about the
burden on interstate commerce. Certain legal and practical
difficulties may prevent the provisions of this bill from
applying to international purchases by buyers located in
California.
7)Related legislation . SB 383 (Jackson) authorizes a person or
entity that accepts credit cards in an online transaction
involving an electronically downloadable product, to require a
cardholder, as a condition to accepting a credit card as
payment in full or in part for goods or services, to provide
the billing ZIP Code and street address number associated with
the credit card, if used solely for the prevention of fraud,
theft or identity theft. This bill is on the Senate Floor.
8)Previous legislation . AB 1219 (Perea, Chapter 690, Statutes
of 2011) provided clarification for those instances when an
entity that accepts credit cards may not request certain types
of personal identification to complete the transaction. AB
1219 also created 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.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081
AB 844
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