I was also asked to fax in my CC and DL when I ordered a new server from my host. At the time it was annoying as I didn't have easy access to a fax machine, and I had been a customer of theirs for 13 months already, but they stood firm.
I have a fax machine now so the request wouldn't be quite so annoying... although the customer loyalty thing still pisses me off.
One thing I will never do is send a copy "in the clear": both cards had some information blocked out. There are enough details visible for them to figure out that it's the same CC I entered into their online signup form.
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