California law says it's illegal for businesses to swipe your driver's license and store the data, but there are plenty of exceptions to the rule. Now more retailers are capturing personal information with a quick swipe through a machine.
Mitzy Kato makes unique crafts like beaded wine bottle ornaments lighted from inside.
"I make a part time living with that so I do need a lot of supplies," Kato said.
Which is why she shops often at the Michael's craft-store chain -- at least until she had a troubling encounter.
"They asked me for my driver's license," Kato said.
Kato was returning lights that didn't fit the bottle. They only cost about $3, but Michael's said she'd have to swipe her driver's license to return them.
"They needed me to take it out of my wallet so that they could swipe it on their computer and it just didn't feel right to me," Kato said.
She had a receipt too, but Michael's said it was store policy. No swipe, no return. Mitzi said for $3, it wasn't worth it. So she kept the lights.
"The driver's license, it's got a lot of personal information, besides my name and address it has my birth date," Kato said.
The National Retail Federation says about one-third of retailers make you show an id to return items. Some of them swipe and the card and capture the information off the magnetic strip.
Stores like Target and A Children's Place will scan your license, but only if you return items without a receipt. Michael's requires a scan even with a receipt. So does Victoria's Secret.
We checked it out. Our intern returned a shirt to Victoria's Secret. Sure enough, the clerk asked for her license and scanned it into a machine. We went to Michael's and returned some glitter glue. Again, the license was swiped behind the register. In both cases, the clerk could not tell us exactly what happens to that data.
"All the information that you're handing over ends up in a big database, which then you lose control of who gets access to that database," Electronic Frontier Foundation spokesperson Rainey Reitman said.
Most retailers send the data to a separate company like Retail Equation, which analyzes data to detect potential fraudulent returns.
So is this legal? The attorney general's office says yes. California law does set limits on swiping and storing information. But retailers may capture your license data if it's used to prevent fraud.
"It's all an effort to control losses and reduce the unnecessary price increases for legitimate consumers," National Retail Federation spokesperson Joe LaRocca said.
LaRocca said stores lost $14 billion to fraudulent returns last year alone. Some examples: Consumers, who buy items, use them once and return them. Even worse? Career thieves use fake ID's and credit cards to buy merchandise and return it for cash.
"The problem with a policy like this is it treats everyone like they are potential criminals," Reitman said.
Fewer than 5 percent of returns are dishonest.
Michael's declined an on camera interview, but tells us the swiping is only to stop abuse. It said, "Michaels' return policy is in compliance with California law and is posted in our stores and on our website."
Victoria's secret also gave a statement saying, "Our return and exchange policy is designed to decrease return fraud while safeguarding customers' personal information."
"Unfortunately, the law has a lot of exceptions in it, exceptions that basically allow any business, any business to swipe your driver's license," Rep. Jackie Speier, D-Calif., said.
The growing practice of license swiping caught the attention of Speier. She wants tougher controls over data collection.
"They should not have access to all that information that's on the magnetic strip; I think that's really very dangerous," Speier said.
Next week we'll look at what Speier and state Assm. Jerry Hill, D-San Mateo, have to say about the laws on driver's license swiping. They want to look at protecting consumers from mandatory swiping to conduct normal business.
