Is It Legal to Ask for Customer ZIP Codes?
We all know the retail checkout tango: They ask if you found everything alright; you reply "yes"; then they ask for payment and for your ZIP code; you provide the string of digits and off you go with your shiny new merchandise.
But is it legal to ask for customer ZIP codes?
The Massachusetts Supreme Court, for one, is cutting the dance short. Last month, the court ruled that a ZIP code cannot be required to complete a credit card transaction because it violates a state consumer-protection law.
The decision, which follows similar rulings in other states, raises questions about when and where the practice of asking for a customer's ZIP code may be illegal.
The Massachusetts ZIP Code Ruling
Why can't retailers collect customer ZIP codes for credit card purchases in Massachusetts? Because the state prohibits the collection of "personal identification information" by retailers for marketing purposes, the court held.
The ruling turned on whether a ZIP code is a form of "personal identification information." The court found that it was, because it provides enough information to identify a customer's address or phone number through the use of a "reverse phone book."
In addition, the court agreed with the plaintiff that her ZIP code would be used by the retailer to "increase profits through direct marketing" or to "sell its customers' mailing addresses to third parties."
Unlawful in Other States Too
About a dozen other states also limit the information merchants can request during the course of a credit card transaction. You can find a list of applicable state laws at the Privacy Rights Clearinghouse's website.
The general rule of thumb in these states, reports The New York Times, is that stores are permitted to ask for a customer's ZIP code if it is actually needed to complete the sales transaction.
For example, American Express utilizes ZIP codes as an antifraud mechanism, according to the Times. But when the purpose is solely to collect "personal identification informtion," the laws are murkier.
Some states, including California, broadly bar the collection of any "personal identification information," according to CBS MoneyWatch. Others are narrower and only prohibit the collection of addresses and phone numbers.
With these consumer-protection laws in place, ZIP code lawsuits against retailers have gained momentum. Given the legal complexity, it might be best to err on the side of caution and consult an experienced lawyer to see if collecting customer ZIP codes is legal in your jurisdiction.
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Related Resources:
- Why Retailers Ask for Your ZIP Code (The New York Times)
- Calif. Merchants Can't Ask for Customers' Zips (FindLaw's Free Enterprise)
- Customer ID Theft: Are Businesses Liable? (FindLaw's Free Enterprise)
