Shulman Bastian LLP

Retail stores pay out millions to settle ZIP code lawsuits

In highly competitive markets, businesses have to diversify their marketing strategies, and to do that successfully you have to know your customers. These days many companies collect information about their customers, analyze the data, and develop an appropriate marketing strategy.

However, at least two dozen lawsuits have been filed in recent years over this kind of data collection, particularly with regard to customers' ZIP codes. When analyzed in connection with individual credit cards, postal codes can reveal a lot of information about people, including their home addresses.

The class-action lawsuits against retailers claim that customers were under the impression that they had to provide their ZIP codes in order to make credit card purchases, and that the companies' collection of ZIP codes resulted in unwanted junk mail sent to consumers. The lawsuits claim that the companies' collection of postal codes violates privacy and consumer laws.

To avoid expensive litigation, many of the businesses reached out-of-court settlements. Roughly half of the cases have been dismissed, however, and others are still caught up in court.

Court records indicate that consumer attorneys involved in ZIP code litigation typically get at least $100,000, while consumers often receive $5 to $25 gift cards as compensation. These kinds of settlements can be extremely costly for businesses, which have paid out gift cards to hundreds of thousands of consumers.

With a proactive approach to litigation, businesses can avoid these and other kinds of unnecessary expenses. If you have questions about protecting your own business, then a business law attorney can develop a tailor-made strategy that meets your specific needs.

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