The Third Circuit’s decision in New Jersey Retail Merchants Association (“NJRMA”) has several important implications for gift card sellers, including compliance with abandoned property laws, which have been discussed here. Less widely discussed is the potential conflict between NJRMA’s holding that gift card sellers must collect buyer ZIP codes and privacy restrictions contained in the New Jersey Restrictions on Information Required to Complete Credit Card Transactions (“Restriction Statute”).
In NJRMA, the Third Circuit upheld New Jersey’s gift card law’s “data collection provision” which requires retailers to collect name and address (at a minimum ZIP code) information from gift card purchasers. However, this ruling may lead to a conflict with the “Restriction Statute,” which prohibits a retailer from requiring a customer to provide “any personal identification information”, including the customer’s address or telephone number, when completing a credit card transaction. (This restriction may not apply to online sales, as several courts have found with respect to an analogous California law.) If ZIP codes are considered to be “personal identification information” then New Jersey retailers would be required to collect ZIP code information from gift card purchasers but then would also be prohibited from collecting that information under the Restriction Statute.
So what’s a company to do? As of now, there is no clear-cut answer as to whether ZIP codes constitute “personal identification information” in NJ. Early last year, the California Supreme Court held that “a cardholder’s ZIP code, without more, constitutes personal identification information within the meaning of [the Song-Beverly Credit Card Act.]” The Restriction Statute is enforceable only by the state Attorney General, but since the California holding NJ plaintiffs’ attorneys have filed several cases alleging that ZIP codes are “personal identification information” and that their collection violates NJ’s Trust in Consumer Contract, Warranty and Notice Act, which provides for a private right of action when a seller offers or enters into “any written consumer contract […] which includes any provision that violates any clearly established legal right of a consumer [ . . .].” Plaintiffs have argued that requiring customers to provide their ZIP code violates the consumers’ “established legal rights” under the Restriction Statute.
In one case the judge denied a motion to dismiss but did not directly address whether a ZIP code is in fact “personal identification information” within the purview of the Restriction Statute. In the other the court similarly did not resolve the issue because it found that the request for a ZIP code was made verbally and therefore the plaintiff lacked standing as it was not part of a “written consumer contract.”
The full implications of the Third Circuit’s decision in NJRMA are still being played out, but its effects are potentially far-reaching, and could extend beyond simple sales and gift card transactions to other promotions provided at the point of sale, such as rewards programs. National retailers trying to reconcile their sales of gift cards, collection of personal information, and, for example, sign-up rewards programs at point of purchase are caught up in a morass of conflicting requirements from both NJ and other states. While legislative solutions had previously been pursued in the NJ state legislature, the last legislative term ended without any of the proposed repealer bills having been enacted; such bills may be reintroduced in the coming term. Trade associations such as the New Jersey Retail Merchants Association and the Retail Gift Card Association are considering their next steps, while a number of retailers had previously threatened to pull out of the state. Importantly, the NJ Treasurer’s Office has indicated that enforcement of the law will not begin immediately– although when enforcement will begin is unclear. Additional guidance may be forthcoming from the Treasurer following further analysis of the Third Circuit’s decision.