Urban Outfitters (URBN) is facing a lawsuit in Washington, D.C., for asking its customers a seemingly innocuous question: "What's your ZIP code?"
The Blog of Legal Times reports that the class-action lawsuit was filed on June 21 on behalf of consumers who shopped at Urban Outfitters and Anthropologie beginning in June 2010. The retailers, according to the lawsuit, asked for ZIP codes during checkout "under the guise that it is required when a customer makes a purchase with a credit card." But the lawsuit claims that the real purpose was to use the data to obtain customer addresses for marketing purposes -- something the plaintiffs say is illegal under D.C.'s consumer protection laws.
We've reached to Urban Outfitters for comment on the lawsuit, and will update if we hear back.
Asking customers for ZIP codes is a relatively common practice in the retail industry, and we've already seen multiple lawsuits filed to put a stop to it. In Massachusetts, the Supreme Court ruled that asking for ZIP codes during transactions violated consumer privacy laws, and California made a similar ruling in a lawsuit against Williams-Sonoma.
As we've previously noted, retailers use your ZIP code to zero in on your home address, thus allowing them to send you marketing materials. Forbes has an in-depth look at how this works, highlighting marketing companies that offer the ability to combine your ZIP code with the name on your credit card to return an address. (It's not hard to understand how that works: There are 27 people with my name in this country, but I'm probably the only Matt Brownell in my ZIP code; getting my ZIP code lets them narrow down which one of us is making the purchase.)
Privacy-conscious shoppers who decline to hand over their ZIP code are often informed that the retailer needs that information to process the transaction. The cashier might even explain that the credit card company requires it to prevent credit card fraud. But banking security expert Al Pascual, a senior analyst with Javelin Strategy & Research, says it's highly unlikely that a store would need to get your ZIP code to process a credit card transaction.
"Using the ZIP code as an authenticator is common in e-commerce, but rarely occurs at the point of sale," he says. "I can think of two exceptions -- one being gas stations, which typically implement its use at the pump, and the other would be during keyed point-of-sale transactions where the [magnetic] stripe could not be read. It is conceivable that Urban Outfitters was using the ZIP code for authentication during every point-of-sale transaction, but it would be highly unusual considering the costs involved."
So the next time a retailer tells you that it needs your ZIP code to process your transaction, you can call its bluff. Threaten to take your business elsewhere -- trust us, they'd rather have a sale than an address -- or just tell them your ZIP code is 90210.
Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.