Redbox Wins Consumer Data Suit

Consumer data has become an important subject of debate in America

This issue has become more prominent since government leaks revealed that U.S. intelligence organizations have access to vast amounts of meta-data. Much of this data is taken from large tech companies, which routinely collect users’ personal information.

I recently came across a lawsuit in which a divided panel of the California 9th Circuit ruled that Redbox, the automated DVD rental company, did not violate the state’s laws by requiring customers to input their ZIP codes to use the service. Hoping to escalate to a class action lawsuit, California residents John Sinibaldi and Nicolle DeSimone filed a suit against the company that alleged it violated California’s Song-Beverly Credit Card Act by demanding personal information.

What is the Song-Beverly Credit Card Act?

Also known as California Civil Code section 1747.08(a), the Song Beverly Credit Card Act says, in short, that persons and organizations that accept credit cards for business transactions are not allowed to require or request that the cardholder provide them with personally identifiable information as a condition to accepting a credit card as payment. It’s been a pretty hot topic in 2014, considering it was amended early in the year to apply to online credit card transactions of downloadable content.

The Act was put in place in 1971, but was amended in 1991 to address two privacy concerns. According to California’s Song-Beverly Credit Card Act: The Past, Present, and Future, a report by The Bureau of National Affairs, Inc., the primary reasons for the amendment, the largest change of which was the inclusion of the language that barred requests for information, were (1) concerns about consumer spending habits being tracked and then sold, and (2) acts of harassment being conducted by store clerks with access to consumer information.

I find the Song-Beverly Act interesting in that it often gets interpreted to mean any request for personal information in California. This is a serious contrast to the rest of the United States, in which it seems impossible to pay for something at the mall without giving up a ZIP code, email address, favorite color and blood type to the dispassionate clerks behind the counter.

Judges rule in Redbox’s favor

U.S. District Judge Jacqueline Nguyen dismissed the case in a Los Angeles court, and the Pasadena-based federal appeals court affirmed the ruling 2-1 June 6. The argument that Redbox advanced and that the courts upheld is that the company’s gathering of ZIP codes falls under Section 1747.08(c)(1)-(4), which provides exceptions to the prohibitions outlined in the law.

Section 1747.08(c)(1) specifically is the exception used by Redbox, which reads, “If the credit card is being used as a deposit to secure payment in the event of default, loss, damage, or other similar occurrence.”

Judge Richard Clifton wrote for the majority that the Redbox transaction in question fits within the exception. Judge Stephen Reinhardt, the dissenter, explained that he feels that the credit card is being used “to secure the charges that constitute the primary agreement between customers and Redbox, charges that are therefore unrelated to ‘default, loss, damage, or similar occurrence.'”

As the security of consumer information continues to weigh heavily on the public’s mind, I think that it is fair to assume that we will see more lawsuits like this one in the near future.

If you have any questions about this post or would like to discuss your sports and entertainment matters , please contact me, Anthony R. Caruso at www.ScarinciHollenbeck.com.