California Supreme Court Finds Trouble with Credit... - Other News

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Credit Card Applications » News » Other » California Supreme Court Finds Trouble with Credit Cards and Zip Codes

California Supreme Court Finds Trouble with Credit Cards and Zip Codes

California Supreme Court Finds Trouble with Credit Cards and Zip Codes
The content is accurate at the time of publication and is subject to change.

If you slide your credit card in California to pay for a retail purchase, the Supreme Court of California has ruled that it is illegal for the retailer to ask for your zip code in conjunction with the transaction. Consumer advocates argued that retailers were collecting this information under false pretenses. Retailers countered that zip codes were collected to prevent credit card fraud. The issue is still open for debate in other states.

Marketing Purposes

Consumers say that big brand retailers are requiring them to provide their zip code when making credit card purchases. They say that the cashier is telling them that the zip code is needed to process the credit card. They believe that this is a lie and that in fact retailers are collecting the information for marketing purposes and that the data can be sold to other businesses.

Credit Card Fraud Prevention

Retailers, including Bed Bath & Beyond, Burlington Coat Factory, Gap and Kohl’s, say they collect zip codes with credit card purchases to verify that the cardholder is who they say they are. It is a common practice when processing credit card payments for the card processor to enter zip codes, names and even complete billing addresses in order to ensure that the credit card information matches the billing information that is on record with the credit card issuer. This is why consumers must enter all of this information when making an online credit card purchase.

It creates a win-win situation. It protects the retailers from processing fraudulent purchase transactions and it prevents the cardholder from having fraudulent purchases show up on their credit card statements. The 150 class-action lawsuits that are hitting the California courts, however, scream of something other than a win-win scenario.

The Ruling

When the California Supreme Court ruled it was illegal for retailers to ask credit card users for their zip codes, it opened the floodgates for class-action litigation. Most legal professionals agree that the majority of the cases will be “unfounded” and get thrown out of court. Since marketing tactics often pit consumers up against retailers and businesses, it is not surprising that the argument is ensuing. The outcome, however, will leave one side without a cause.

Disclaimer: This editorial content is not provided or commissioned by the credit card issuer(s). Opinions expressed here are the author's alone, not those of the credit card issuer(s), and have not been reviewed, approved or otherwise endorsed by the credit card issuer(s). Reasonable efforts are made to present accurate information, however all information is presented without warranty. Consult a card's issuing bank for the terms & conditions.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.
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