Beware of Class Action Lawsuits under Section
1747.8 of the California Civil Code
Businesses who accept credit cards
should be mindful of the restrictions under Section
1747.8 of the California Civil Code. Section 1747.8
prohibits retailers from requiring or even asking
for personal identification information (e.g. home
address, home telephone number) in connection with a
credit card sale. The relevant portions of this
statute reads as follows:
(a) Except as provided in subdivision (c), no
person, firm, partnership, association, or
corporation which accepts credit cards for the
transaction of business shall do either of the
following:
(1) Request, or require as a condition to
accepting the credit card as payment in full or in
part for goods or services, the cardholder to write
any personal identification information upon the
credit card transaction form or otherwise.
(2) Request, or require as a condition to
accepting the credit card as payment in full or in
part for goods or services, the cardholder to
provide personal identification information, which
the person, firm, partnership, association, or
corporation accepting the credit card writes, causes
to be written, or otherwise records upon the credit
card transaction form or otherwise.
(3) Utilize, in any credit card
transaction, a credit card form which contains
preprinted spaces specifically designated for
filling in any personal identification information
of the cardholder.
(b) For purposed of this section “personal
identification information,” means information
concerning the cardholder, other than information
set forth on the credit card, and including, but not
limited to, the cardholder’s address and telephone
number.
(c) Subdivision (a) does not apply in the
following instances:
(1) When the credit card is being used as
a deposit to secure payment in the event of default,
loss, damage or other similar occurrence.
(2) Cash advance transactions.
(3) When the person, firm, partnership,
association, or corporation accepting the credit
card is contractually obligated to provide personal
identification information in order to complete the
credit card transaction or is obligated to collect
and record the personal identification information
by federal law or regulation.
(4) When personal identification
information is required for a special purpose
incidental but related to the individual credit card
transaction, including, but not limited to,
information relating to shipping, delivery,
servicing, or installation of the purchased
merchandise, or for special orders.
(d) This section does not prohibit any person,
firm, partnership, association, or corporation from
requiring the cardholder, as a condition to
accepting the credit card as payment in full or in
part for goods or services, to provide reasonable
forms or positive identification, which may include
a driver’s license or a California state
identification card, or where one of these is not
available, another form or photo identification,
provided that none of the information contained
thereon is written or recorded on the credit card
transaction form or otherwise. If the cardholder
pays for the transaction with a credit card number
and does not make the credit card available upon
request to verify the number, the cardholder’s
driver’s license number or identification card
number may be recorded on the credit card
transaction form or otherwise.
(e) Any person who violates this section shall be
subject in a civil penalty not to exceed two hundred
fifty dollars ($250) for the first violation and on
thousand dollars ($1000) for each subsequent
violation to be assessed and collected in a civil
action brought by the person paying with a credit
card, by the Attorney General, or by the district
attorney or city attorney of the county or city in
which the violation occurred. However, no civil
penalty shall be assessed for a violation of this
section if the defendant shows by a preponderance of
evidence that the violation was not intentional and
resulted from a bona fide error made notwithstanding
the defendant’s maintenance or procedures reasonably
adopted to avoid such an error. When collected, the
civil penalty shall by payable, as appropriate, to
the person paying with a credit card who brought the
action, or to the general fund of whichever
governmental entity brought the action to assess
civil penalty.
Hence, if a business is unfamiliar
with Section 1747.8 and has a practice of asking for
its customer’s address and telephone number when a
customer presents a credit card for purchase, the
business is potentially subjecting itself to
liability of $250 for the first violation and $1,000
for each violation thereafter. Given the number of
credit card transactions that retailers process
every day, the aggregate liability over time is
enormous.
The real impact of Section 1747.8 is felt when
claims are prosecuted on a class basis. There have
been a number of class action lawsuits filed
recently in California under Section 1747.8. For
example, if a retailer processes 100,000 credit card
transactions every year and requests personal
identification information for each of these
transactions, the potential liability for the class
of individuals affected by this practice is
$100,000,000.00 (One Hundred Million Dollars).
Businesses would be well advised to become familiar
with Section 1747.8 and implement written policies
designed to prevent violations of Section 1747.8.
The foregoing is for informational purposes only and
does not constitute legal advice. Because different
situations may require different courses of action,
the foregoing should not be relied upon without
consulting competent legal counsel regarding the
subject matter set forth herein.
