The Collection of Zip Codes by Gas Stations and Massachusetts Consumer Protection

Massachusetts has enacted laws to protect consumers, including a law that prohibits a business from requiring personal identification information, other than that required by the issuer of the credit card, on the credit card transaction form. Mass. Gen. Laws. Ch. 93 § 105. A violation of Section 105 is deemed an unfair and deceptive trade practice under section 2 of Mass. Gen. Laws chapter 93A. Chapter 93A provides that a person who has been injured by an unfair and deceptive trade practice has the right to sue for damages and equitable relief.

he U.S. District Court of Massachusetts recently considered how these laws apply to gas stations that require the customer to enter her zip code at the credit card terminal in the case of Diviacchi v. Speedway, LLC. A customer filed a punitive class action suit, seeking damages under chapter 93A in one count and injunctive relief in the other.

The plaintiff moved for a preliminary injunction, which the court combined with a trial on the merits. When the court set a trial date for the plaintiff’s individual claims only, she then dismissed her claim for damages, and therefore the class claim moved forward with only the claim for injunctive relief.

At trial, the plaintiff testified about the fuel purchasing process at the defendant’s station. She stated that she would run her card and the machine would then ask for her zip code. After she input the zip code, the machine allowed the customer to pump the gasoline. The plaintiff testified that she did not know what happened to the zip code after it was entered but did not allege it was used for any marketing purpose.

The defendant provided affidavits stating that the zip code was used by the Address Verification System used by the credit card processor to prevent fraud. According to the defendant, the zip code is held in the volatile memory of the fuel pump, fuel controller, and credit appliance. The information is sent to the credit card processor, which sends it on to the card issuer, which then compares it to the billing address on file. The card issuer then sends a one-letter code back to the processor and the defendant, indicating whether the zip codes match and the transaction is authorized. After the transaction is authorized, the credit card appliance records the account number, name, and expiration date on the card. The zip code is not recorded and is kept only in the volatile memory. The defendant, therefore, does not have access to the zip codes and does not use that data for marketing purposes or sell it to third parties.

The parties disagreed as to whether injunctive relief was available when the plaintiff does not claim injury. The court considered two Massachusetts Supreme Judicial Court cases that were at odds on the issue. In Leardi v. Brown, the Supreme Judicial Court found that the invasion of a legal right by a landlord in inserting impermissible language in a lease was sufficient to constitute an injury to the tenants, even though the illegal terms had not been enforced. In the more recent case of Tyler v. Michaels Stores, Inc., the Supreme Judicial Court found that a zip code was personal identification information under Section 105. The court went on to state, however, that a mere violation under Chapter 93A does not necessary constitute an injury or loss entitling the consumer to at least nominal damages and attorney’s fees. The court held that a plaintiff pursuing a claim under Chapter 93A, section 9 had to allege and prove a distinct injury or harm arising from the unfair or deceptive act. According to the court, a distinct injury could include the receipt of marketing materials and the sale of the consumer’s information.

In the current case, the plaintiff had not received unwanted marketing materials, and her information had not been sold. The remaining question, then, was whether she could obtain injunctive relief without an injury aside from the violation of the statute.

The court found both parties’ arguments on the issue compelling, but it ultimately determined that the Supreme Judicial Court’s decision in Tyler was limited to claims for damages. The plaintiff here could pursue a claim for injunctive relief without a distinct injury.

The facts of this case, however, did not fall under the scope of Section 105. Section 105 prohibits putting personal identification information that is not required by the card issuer on the credit card transaction form. In this case, the zip code was only held in the volatile memory. The credit card transaction form did not include the zip code. After the transaction is authorized, the zip code is erased and cannot be retrieved. The court denied the plaintiff’s request for an injunction.

In this case, the court determined that defendant had not violated Section 105, but businesses do sometimes break the law and take advantage of consumers. If you have a legal issue involving consumer protection, skilled Massachusetts consumer protection lawyer can help you. Call the Law Offices of Richard Mucci at (781) 729-3999 to discuss your case.