California Senate Passes SB 383 Expanding The Song-Beverly Credit Card Act to Online Transactions of Downloadable Content
On January 30, 2014, the California Senate approved SB 383, which amends the Song-Beverly Credit Card Act (Song-Beverly Act) to apply to online credit card transactions of electronic downloadable content (e.g., music, videos). Originally crafted to apply to all online credit card transactions, the bill has been resurrected in pared-down form from its death in the Senate last May.
The revised SB 383 allows online merchants to collect personal information, such as zip codes and street addresses, in connection with online credit card transactions of electronic downloadable products, provided that the information is: (1) used only for fraud detection and prevention purposes, (2) destroyed after use, and (3) not shared unless obligated by law to do so. The bill also allows for the collection of additional personal information only if the consumer elects to provide it, and if s/he is informed of the purpose and intended use of the requested information, and has the ability to opt out before the online transaction is complete.
The Song-Beverly Act, as it currently stands, prohibits merchants from asking for any personal identification information, other than a form of personal identification (e.g., driver’s license), in order to complete a credit card transaction. While there are specific exceptions to this rule, such as allowing zip codes at gas pumps and personal information when it's incidental to the transaction (i.e., for shipping and delivery purposes), it is unclear whether such prohibitions apply to online transactions where there is no actual human interaction. Indeed, in February of last year, the California Supreme Court held that Song-Beverly did not apply to online transactions involving downloadable products. See Apple Inc. v. Superior Court, 56 Cal.4th 128 (2013).
SB 383 is in direct response to the Apple case, but given its narrow application to just downloadable products, it still does not answer the question of whether the Act applies to other online transactions, such as those where the product is mailed to the consumer or picked up in the store. Many trial courts are holding that it does not, and plaintiffs are challenging these decisions in the appellate courts. See e.g., Salmonson v. Apple, Cal. Court of Appeals, Case No. B253475 (appealing court decision that Song-Beverly Act did not apply to online transactions picked up at store); Ambers v. Buy.com, 9th Circuit Case No. 13-55953 (appealing court’s decision that Song-Beverly Act did not apply to online purchase shipped to customer). Arguably, since the Legislature had the opportunity in the original bill to apply the Act to all online transactions and yet chose not to do so, online merchants may have some additional legislative history to assist them in upholding these rulings.
We will be keeping our eyes on this bill as it moves through the Assembly. It will be interesting to see whether the pending appeals impact the development of this legislation, and vice versa.