May I See Your ID?

On January 1, 2018, a new Texas law went into effect permitting a merchant to request a government-issued photo identification to verify the identity of a credit or debit card user – and decline the transaction if the buyer refuses to show it.  The new law is not mandatory.  The law does not require a merchant to request photo identification, nor does it require the merchant to decline the transaction if the photo identification is not produced.  It simply gives the merchant the right to request the photo identification and the option to turn away the customer without the identification.

Supporters of the bill wanted this change in an attempt to minimize fraudulent transactions.  If a merchant is able to compare the credit card to a photo identification, it presumably should cut down on the number of purchases that were made with a stolen credit card.  However, not all merchants supported a credit card photo identification bill.  Many merchants were concerned that a photo identification requirement would slow down their transaction times.  This could hurt business in places like fast-food restaurants where transaction times need to be quick.  The law cuts a compromise to address this concern, and simply makes requesting a photo identification optional.

Some shoppers also opposed the law over concerns that their privacy could be at risk if the personal information from their identification gets into the wrong hands.  With a person's photo identification and credit card, cashiers now have access to a person's name, address, date of birth, driver's license number, credit card number, and the security number on the back of the card.  In the wrong hands, this could be enough information for someone to make online purchases or even steal their identity.

With the new law in effect, retailers now have the choice of whether to request photo identification for credit or debit card purchases.  This choice could lead to other legal issues, however.  If cashiers are given an option, they could potentially apply this option in a discriminatory way, asking for identification from some customers but not others.  To avoid potential discrimination claims (and a potentially negative public relations situation), retailers would be wise to implement policies in their stores to either request photo identification in all cases, or to never request photo identification unless there are extenuating circumstances.

Another wrinkle in this is that merchants' agreements with companies like Visa and MasterCard permit the merchants to request a photo identification, but explicitly prohibit retailers from declining the transaction if the identification is not provided.  It is yet to be seen how the new law will impact those agreements.  These credit card companies are already taking the position that their agreements are not affected by the law.  Their position is that retailers have a choice in declining the transaction under the law, but the retailers contractually agreed not to decline the transaction in their agreement with companies like Visa or MasterCard.  Retailers should be wary of breaching their contracts with these credit card companies despite the new state law.

The new law specifically does not apply to transactions conducted using a mobile wallet.  Therefore, retailers are not granted the right to check identification and decline transactions for customers using Apple Pay or something similar.