A California court ruled last week that retailers could lawfully collect ZIP code information to reduce credit card fraud, efforts that result in lower prices for consumers. Following the California Supreme Court’s decision in Pineda v. Williams-Sonoma Stores, Inc., retailers in the state have faced claims that collecting ZIP code information during a credit card transaction was illegal, subjecting stores to penalties of up to $1,000 per transaction. In Flores v. Chevron, the Court of Appeal held that collecting ZIP codes to ferret out fraud was a “special purpose” allowed by the Song-Beverly Credit Card Act, rejecting claims by so-called consumer protection lawyers that this form of fraud prevention was not allowed. The ruling brings welcome news, reassuring retailers that they can fight fraud without running afoul of the Act.

In the flurry of litigation that followed Pineda, plaintiffs’ lawyers argued that any collection of ZIP code information during a credit card transaction violated Song-Beverly, even if the information was used as part of an address verification service offered by credit card issuers or to otherwise prevent fraud. Retailers have argued that collecting information to rein in the $200 billion a year credit card fraud industry had to be allowed under the Act.