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March 1, 2013 / Shehnaz M. Bhujwala

California Supreme Court: Online Retailers May Require Consumers to Provide Personal Identifying Information for Credit Card Transactions Involving Electronically Downloaded Products

The California Supreme Court recently ruled that the Song-Beverly Credit Card Act of 1971 (Cal. Civ. Code §§ 1747 et seq.), which prohibits brick-and-mortar retailers from collecting personal identifying information such as addresses and telephone numbers in conjunction with credit card transactions, does not prohibit online retailers like Apple Inc. from requesting or requiring such information in order to process a credit card transaction for an electronically downloadable product.

As the Court explained in Apple Inc. v. Superior Court, Case Number S199384 (February 4, 2013), the Credit Card Act pre-dates the Internet era that ushered in a whole host of online retailers such as Apple and Amazon, and whether the Credit Card Act’s prohibitions applied to these new types of retailers and their online transactions was unclear. Given the ambiguity, the Court carefully considered the specific statute at issue, Civil Code section 1747.08, and concluded that the text, structure, and purpose of the statute does not apply to online purchases in which the product is downloaded electronically applied. The Court reasoned that that the concerns regarding privacy and security that are addressed by the Credit Card Act are different for online transactions compared to transactions with brick-and-mortar retailers. Although brick-and-mortar retailers may physically inspect credit cards provided by consumers to avoid credit card fraud, online retailers cannot visually inspect the credit card, the signature on the back of the card, or the consumers’ photo identification.

The Court’s ruling was not unanimous. Rather, three of the Court’s justices dissented, stating that the majority’s ruling “relegate[s] to the dust heap the “robust” consumer protection … at the heart of section 1747.08 (dissenting opinion by Kennard, J. at p. 6) and represents a major loss for consumers (id. at p. 1) that leaves online retailers free to collect and use the personal identification information of credit card users as they wish” (dissenting opinion by Baxter, J. at p. 1).

Although the Court’s ruling makes clear that online retailers offering electronic downloads of products may ask consumers for personal identifying information, brick-and-mortar retailers such as gas stations, convenience stores, and other stores with physical locations must still comply with the Credit Card Act and are prohibited from collecting a consumer’s personal identifying information in connection with a credit card transaction. If you or someone you know has been forced to provide personal information such as your address, telephone number, or similar information, your rights under California law may have been violated. Please contact Khorrami, LLP to set up a confidential consultation.

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