Frankfurt Kurnit Klein & Selz

February 16th, 2011

New Restrictions on Billing Practices

Two recent developments from New York and California may have an impact on nationwide retailers’ billing practices.

California Prohibits Retailers From Requesting ZIP Codes

The California Supreme Court ruled last week that retailers that request and record a credit cardholder’s ZIP code in conjunction with a credit card purchase violate the Song-Beverly Credit Card Act of 1971 (the “Credit Card Act”), which prohibits businesses from requesting that cardholders provide “personal identification information” during credit card transactions and then recording the information (Pineda v. Williams-Sonoma Stores, Inc.). The Court held that a consumer’s ZIP code constitutes personal identification information, since a retailer can use the consumer’s name and ZIP code in order to locate the consumer’s full address for its own marketing purposes or to sell to other businesses (as the plaintiff alleged was done in this case). The Court, however, emphasized that the Credit Card Act does not prohibit retailers from requesting identification from consumers which may contain personal identifying information (including a ZIP code); only the requesting and recording of such information is barred. The decision is also consistent with the California Appellate Court’s 2003 case Florez v. Linens N’ Things, which held that the Credit Card Act prevents retailers from requesting and recording consumers’ personal information in connection with a credit card transaction because a consumer might perceive that request as a condition of payment by credit card.

New York Passes Law Prohibiting Fees for Paper Billing

A recent New York State law, effective April 18, 2011, prohibits businesses from charging consumers a fee or differential rate when they choose to receive a paper billing statement or pay their bills by United States mail. The statute -- N.Y. Gen. Bus. Law § 399-zzz -- does not, however, bar a business from offering consumers a credit or other incentive to elect a specific payment or billing option.

For more information on how these new laws affect retailers, or on any other advertising or marketing law issues, please contact Jeff Greenbaum at (212) 826 5525 or jgreenbaum@fkks.com, Terri Seligman at (212) 826 5580 or tseligman@fkks.com, or any other member of the Frankfurt Kurnit Advertising Group.

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