California Exempts Online Music Retailers From Parts Of Credit Card Act

Credit Card ActCalifornia’s Song-Beverly Credit Card Act made things difficult for online businesses. But a Supreme Court ruling will have online sellers jumping for joy.

Did the California Supreme Court inadvertently create a shady cottage industry? In a little discussed case, California’s highest court ruled that music retailers (i.e., Apple) aren’t subject to data collection parameters outlined in the state’s credit card act.

California’s Credit Card Act

Passed in 1971, California’s Song-Beverly Act established regulations for credit card privacy. Specifically, the law forbids retailers from collecting identifying information, without permission.

Why The California Supreme Court Exempted Online Sellers From Credit Card Act

Since an actual card cannot be inspected in an online marketplace, to ensure a secure checkout, e-tailers use other signals (like zip codes) to authenticate a card. As such, the Song-Beverly Act made it difficult for online retailers to properly authentic credit cards, without breaking the law.

Writing for the majority, Justice Goodwin Liu reasoned that the “legislature did not intend to achieve privacy protection without regard to exposing consumers and retailers to undue risk of fraud.”

Not everyone on the bench agreed with Liu’s position. Justice Joyce L. Kennard dissented:

“Internet retailers are free to demand personal identification information from their credit-card-using customers and to resell that information to others. The majority’s decision is a major win for these sellers, but a major loss for consumers, who in their online activities already face an ever-increasing encroachment upon their privacy.”

Regardless of your stance, legal precedence in California asserts that online music retailers are now exempt from certain privacy parameters outlined in California’s credit card act.

If you’re an online business in need of a law firm that deals in Internet law, get in touch with Kelly / Warner today.

Yes, I Want to Speak with Someone about an Internet Law Issue »