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California Senate Approves Online Credit Card Privacy Bill

By TechTaffy Desk

The California State Senate has approved an online privacy legislation, SB 383 (Jackson), on a 21-13 vote. The Consumer Federation of California and United Food & Commercial Workers Union sponsored the bill.

SB 383 addresses a state Supreme Court decision (Apple v. The Superior Court of Los Angeles) which eliminated long-standing privacy rights for online credit card purchases of downloadable products.

Since 1990, California law has restricted merchants from gathering personally identifiable information during a credit card transaction, with limited common sense exceptions (such as collecting an address if required for shipping or installation of a product). The law was designed to prevent unwelcome marketing based on the collection of consumer phone numbers, addresses, and the like.

In the Apple case involving iTunes downloads, a 4-3 state Supreme Court majority opined that these privacy protections predated the advent of the internet and were therefore not applicable to online sales of downloadable products. The Court cited heightened risks for fraud in an online transaction, but it did not limit the ruling to permit information gathering for fraud prevention purposes. As a result, online merchants may require customers to provide all kinds of personally identifiable information, and they may use that information for marketing, building dossiers on consumers, or for sale to strangers.

SB 383 strikes a balance between privacy protection and fraud prevention. It allows an online merchant to collect personal information required to prevent or investigate criminal activity such as identity theft. However it may use the information only for that purpose. It requires the business to dispose of the personal information when the crime prevention need no longer exists.

It also allows an online business to ask a customer to voluntarily opt-in to information gathering for marketing and other purposes, provided the business informs the consumer how it will use the information gathered.

Apple, the California Retailers Association and high tech industry lobbyists led opposition to SB 383. Consumer, privacy and labor advocates supported SB 383.

SB 383 moves to the California State Assembly for consideration this year.

 

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