Home > Property & Casualty > Zip codes added to Massachusetts Consumer Protection Law

Zip codes added to Massachusetts Consumer Protection Law

consumer-protectionThe Massachusetts Supreme Judicial Court (SJC) recently ruled that retailers may now be sued if they record consumer zip codes during credit card transactions and use the information for business purposes. The decision stems from a recent case, Tyler v. Michaels Stores, Inc. in which the plaintiff claimed the retailer (Michael’s) used her zip code to find her address and telephone number and send her unsolicited marketing materials. The woman said she was told she needed to provide her zip code when making a credit card purchase at the store, when in fact it was not required by the credit card issuer. In the case’s final ruling, the Court asserted that zip codes are “personal identification information” subject to the restrictions of The Massachusetts Consumer Protection Law governing credit card and check transactions. Chapter 93, Section 105(a) of the law states that retailers cannot record personal identification information on credit card transaction forms unless it is required by the credit card issuer or needed for delivery purposes and voluntarily provided by the customer.

The law prohibits retailers from using any personal identification information for business purposes, such as sending marketing materials to customers, and considers doing so an unfair and deceptive act that gives customers the right to file suit. According to Chapter 93A, Section 9 of the statute, the consumer plaintiff must prove that he or she has been “injured” by the unfair or deceptive practice. During the case, the SJC examined the nature of the injury that a plaintiff must allege in order to file a private consumer suit under the law, and determined that the violation must cause some sort of “separate, identifiable harm” to the consumer that arises from the violation itself. Therefore, if the merchant obtains the customer’s zip code or other personal identification information but never uses it for any sales purposes, the merchant cannot be sued. However, if the merchant collects that same information and uses it for its own business purposes, it has violated the legal rights of the consumer and caused separate, identifiable harm.

The ruling should signal a warning to Massachusetts merchants, both online and in-store, that it may be time to review their credit card sales practices and determine if any need to be revised. Those using personal identification information like zip codes during credit card transactions should be sure that none of the data is being used to solicit customers with advertisements and other marketing materials in order to avoid similar lawsuits like the Tyler case. Retailers should also note the SJC’s ruling in the Tyler case affirmed this type of solicitation as a legitimate cause of “consumer injury” that is distinct from the statutory violation itself.

Regulation of privacy data like personal identification information continues to evolve and pose new challenges for both businesses and consumers. There may be instances where insurance policies may provide some relief for businesses with regard to these new challenges. It is prudent for clients to review and assess their exposures based on business practices. Please contact your WGA Client Executive for additional information on this issue.

About the Author

Ann Mizner McKay is the General Counsel and Senior Vice President at WGA. She manages the legal affairs of the company and also manages the Claims Department.

617.646. 0238 | AMiznermckay@wgains.com | Connect with Ann on LinkedIn

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