The state Supreme Court shocked retailers Thursday when it found that a commonly accepted practice by merchants to record a customer's ZIP code for a credit or debit card purchase was against California law.  The unanimous decision was handed down in a 17-page opinion authored by Associate Justice Carlos R. Moreno. It is the first decision joined by new Chief Justice Tani Cantil-Sakauye.

The justices overturned a 2009 appellate ruling which had concluded that a ZIP code applies to a group and, as such, is not “personal identification information” covered by the Credit Card Act. The state Supreme Court, however, declared that "a ZIP code is readily understood to be part of an address," and is “information unnecessary to the sales transaction," like the rest of the address or a telephone number would be.

The state Supreme Court's logic hinged on the practical applications of a ZIP code and a person's name in today's world of electronically connected databases. According to the high court, retaining a person's ZIP code for a commercial transaction is tantamount to having their full address. The "statute's plain language, protective purpose and legislative history" leave no room for the invasive practice, says the opinion.

In 2008, Jessica Pineda filed a lawsuit against Williams-Sonoma Stores Inc. claiming that the company used the ZIP code she had divulged to a store clerk in order to target her home address with direct-mail advertising. After her case was thrown out by a San Diego Superior Court judge, it made its way to the state Supreme Court with expectations by retail associations of another dismissal.

Richard Holober, executive director of the Consumer Federation of California, told the Sacramento Bee that the ruling stands as:

     "a great victory for consumer protection and common sense. It's nonsensical that a retailer can collect bits and pieces, turn them over to a data aggregation service and have a field day selling the information and otherwise using it for business purposes."

The president of the California Retailers Association, Bill Dombrowski was caught off guard by the ruling which he called “a terrible decision.” He added:

     "It's just a very broad interpretation of the word 'address,' with which we strongly disagree. There's not much more I can say.”

Marketing firms side with Dombrowski. Why wouldn't they? For years, marketers have used ZIP codes to increase the efficiency of their advertising by targeting specific neighborhoods and demographics with specially tailored ads based on purchasing history.

Pineda's lawyers said in a state Supreme Court brief that Williams-Sonoma:

     "preys on its credit card customers who are accustomed to providing their ZIP codes for legitimate verification purposes at gas stations during 'pay at pump' transactions and mistakenly assume that Williams-Sonoma is requesting their ZIP codes to process their credit cards."

The brief further states that when providing a ZIP code for a "pay at pump" transaction, the information is processed through the issuing bank and not shared with gas stations.