Lindsay & Stonebarger - Local Class Action Suits Settled To Protect Consumers From Identity Theft -

July 14th, 2006

The Law Office of Lindsay & Stonebarger is pleased to announce it has successfully reached settlements in class action lawsuits that help protect California consumers from identity theft and unwarranted intrusion into their personal and financial privacy. Lindsay & Stonebarger filed the lawsuits after it discovered that a number of companies doing business in California, The Children’s Place, The Container Store, Best Buy, Dillard’s, and Save Mart Supermarkets, violated State Law when they sought and collected personal information, including telephone numbers, from credit card customers, putting those customers at risk to fraud and identity theft.

On July 7, 2006, Stanislaus County Superior Court Judge William A. Mayhew signed an Order Granting Final Approval and Entering Judgment based upon the settlement reached with The Children’s Place, a New Jersey based children’s clothing store chain that operates approximately 65 stores in California, including Modesto, where the lawsuit was filed. The lawsuit caused a change in The Children’s Place’s collection of information about its customers and also provided millions of dollars in potential benefits to customers in the form of direct mailing of coupons and claimed gift cards.

Lindsay & Stonebarger had previously obtained final approval and judgment based upon similar settlements against Best Buy, The Container Store and American Golf Corporation.

On June 29, 2006, San Joaquin Superior Court Judge Bob W. McNatt signed an Order Granting Preliminary Approval of a similar class action settlement with Dillard’s, an Arkansas based department store chain operating stores in California, including Stockton. According to the settlement nearly 250,000 Dillard’s customers are eligible for $20 gift cards.

“We feel these are important victories for California consumers,” said James Lindsay, a shareholder and founding member of Lindsay & Stonebarger. “When we first began investigating this problem, we were shocked at how pervasive it was.”

At some of the businesses, clerks specifically asked credit card customers for their telephone numbers. Other businesses solicited that information by utilizing credit card forms containing a preprinted space for “phone number” under signature lines.

“The question is, why did the businesses seek that information? What we found during the discovery process is that some businesses used it for marketing purposes. In many cases, it was revealed that the business was actually using the phone number to ascertain another piece of information — home addresses. But what all the cases had in common is this: The business had no legal authority to ask for such information, and by compiling that information — and in some cases storing it on forms containing full 16-digit credit card numbers, card type, and expiration date, along with the customer’s name — they put their customers at risk. We found one particularly disturbing example where credit card forms containing this sensitive personal and financial information was actually sitting around in boxes in a warehouse.”

Consumers, including plaintiffs in these particular cases, are concerned for a variety of reasons with being asked to provide personal information. Many feel it is a privacy issue that ultimately leads to unsolicited telemarketing calls and direct mail. But the real concern is that collecting such information only increases the likelihood that it may fall into the wrong hands. Those fears are well founded.

The Federal Trade Commission notes that identity theft is far and away the largest concern of consumers who file complaints with the agency, representing 37% of all complaints — more than three times as many complaints as internet auctions, which ranked second. A study by the Identity Theft Resource Center, which in 2004 received a Department of Justice National Crime Victims Service Award, showed that identity theft costs victims on average $1,400 in out of pocket costs — a number that is rising — as well as 600 hours to correct the problem. The same study established that employees of businesses that had obtained the person’s information were the most frequent cause of the identity theft where the cause could be identified. Studies done in July 2003 by Gartner Research and Harris Interactive estimate that 7 million people had fallen prey to identity theft in the prior 12 months.

Former Assemblymember and President of California’s premier on-line progressive website, Hannah-Beth Jackson, referred to the successful prosecution of these cases as, “an important victory for California’s consumers and a clear vindication of the people’s right to have their personal and financial information remain private. No business should be able to use this information without a consumer’s knowledge and clear and affirmative permission. It’s time that the rights of consumers are respected and that laws protecting personal information are complied with by anyone doing business in this state.”

The California Legislature recognized the potential for abuse back in 1990 when it passed AB 2920 into law, which became California Civil Code section 1747.8 as part of the Song Beverly Credit Card Act. The law prohibits retailers who accept credit cards from verbally requesting personal identification information and recording that information as part of a credit card transaction or from utilizing a preprinted credit card transaction form that contains spaces designated for customers to fill in personal identification information whether or not the information was obtained or even utilized. The law contains a statutory penalty of up to $250 for the first violation and up to $1,000 for each subsequent violation.