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Your Credit Card: Old Calif. Law, New Legal Challenge


Your Credit Card: Old Calif. Law, New Legal Challenge

Did you know that if you live in California, your ability to buy things online could be in jeopardy? There’s an old law on the books that significantly limits the amount of information you are required to do your online shopping using a credit card. That law is the focus of a new lawsuit that has huge retailers like Apple, Wal Mart and eBay pitted against the California Supreme Court.

Song Beverly Credit Card Act

That law, better known as the Song Beverly Credit Card Act, was put into place in 1991, before we really began doing a lot of online shopping. Its purpose was to protect credit card consumers from being forced to provide unnecessary information in traditional brick and mortar businesses. It served its purpose then, and apparently, there are some who still say it applies to online purchases. Consumer rights advocates insist the law easily applies because it allows consumers to put better protective mechanisms in place for their consumers. Plus, it protects the consumers from being forced to release information to those less than noble retailers. They say information such as phone numbers, including cells, isn’t necessary to complete a purchase. The problem, say the retailers, is that phone numbers are necessary so that they may contact consumers if their shipment is being delayed.

And now, on Wednesday, the California Supreme Court gets to decide how the law will be applied going forward.

The Critics

Those who say the law serves a purpose – even in an online environment – say retailers are less concerned about protecting their shopper from fraud prevention and delayed shipment, but rather, they’re more interested in collecting information for marketing purposes.

For those who do say fraud is much more likely say that consumers can only benefit from keeping their personal information to themselves. One consumers right advocate, Pam Dixon, who is executive director of the World Privacy Forum, says:

This case is an early warning sign about what we’re going to be seeing. There is a balance that needs to be found between the prevention of fraud and the over collection of consumer information.

These consumer advocates agree that some information is necessary, they disagree on just how much. For instance, many say a zip code is acceptable since it allows the online merchant to verify that bit of information without forcing the consumer to tell all for the sake of validation. They insist the Song Beverly Law is written perfectly as it is and should be applied across the board to retailers, including online merchants.

The law was controversial even before the online retailer dynamic entered the picture. Two years ago, the Supreme Court found itself having to discern whether Williams Sonoma was going too far when it asked for zip codes to key into its computer as part of the check out process in its brick and mortar locations. Those who sued said it violated the law. Soon, dozens more lawsuits began hitting the California court system. Those who said a zip code was unnecessary insist simply comparing the credit card to a driver’s license is all that’s needed to validate the purchase. The one exception was found in gas stations. They were able to prove in their case that a zip code ensured the consumer was not committing fraud.

Massive Lawsuit

So now, there is a massive class action lawsuit filed against Apple, eHarmony and even Ticketmaster. The lawsuit is seeking to apply the same law to online commerce. David Krescent, who is listed as lead plaintiff in the Apple case, is alleging he was forced to provide his address and phone number to establish an iTunes account. He tried to explain to the company by saying that information was no necessary and says it violated the law. His attorney agrees.

Consumers have a right to privacy,

said Eric Shrieber, Krescent’s attorney. He insists that if a business doesn’t have a valid reason for needing the address, then a consumer shouldn’t be forced to provide it, especially if it’s music he’s buying and downloading, suggesting there’s nothing that would be shipped to his physical address.

It looks as those many legal experts agree with Shrieber. One University of San Francisco law professor, Susan Friewald, says,

I think it’s a pretty high hurdle for Apple to overcome.

Attorneys for the retailers, including Apple, aren’t speaking to the media. What Apple’s lead counsel did do, however, was file court papers saying the law was incompatible with more modern commerce needs and consumer shopping habits. He’s encouraging the Court to drop the cash and protect online merchants. He said the consumers’ position “would threaten to produce unintended and absurd results, including the facilitation of fraud against e-retailers who have no way to confirm the customer’s right to use the credit card.”

What are your thoughts? How should the Supreme Court rule?

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