The Peoples Republic of California is looking more and more like Europe everyday. In case you missed it: California retailers can't ask patrons for ZIP Codes, court rules.
In reading the story, the courts ruling seems like a noble one -- protect consumer privacy. But I feel this blanket decision totally ignores the rates merchants are charged processing these transaction with vs. without address verification information and all but ignores the security aspect for merchants requiring a ZIP code. To me, a ruling that merchants could not use any information associated with the processing of the payment for marketing or purposes, then it would have been fine. When I saw the headline, it was screaming: "CALIFORNIA WELCOMES ALL SCAMMERS AND FRAUDSTERS WITH OPEN ARMS!"
As to the rate difference, California card-present merchants will need to decide what to do in the event a card cannot be swiped: Don't ask for the ZIP code and accept the higher cost and higher potential for a fraudulent transaction OR ask for another form of payment. My advice with be the latter, but this may not be the optimum advice for all merchants.
The court touched on the security aspect, but it does leave a big hole: "....allows ZIP Codes to be collected under certain circumstances, such as at gas station pumps where the information is requested for security reasons..." -- why wouldn't all merchants fall under this "certain circumstance?"
And then the biggest little line in the entire story: "The court said retailers may still ask consumers to produce a driver's license for identification purposes but may not record the personal information on it." This advice from the courts goes against most (maybe all) merchant agreements. I'm not sure if this was a simple oversight by the courts showing lack of knowledge in payment processing regulations, or if this was an intentional warning shot over the bow of the card brands?
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