Chip Cards & Liability Shift are Coming Oct. 1

Monday, August 17, 2015

Retailer alert! On October 1, there will be a dramatic shift in the way fraudulent or counterfeit transactions are handled.

Currently, if a merchant were to accept a counterfeit card (and do everything else correctly) there would not be any liability for that chargeback. The bank that issued the card would be responsible for the loss. After October 1st, your business could be liable for ANY and ALL FRAUD CHARGES if your credit card processing equipment is not updated to accept EMV card payments.

The reason for this change, known as the “liability shift,” is that the card networks (Visa, MasterCard, Discover and American Express) all have changed their rules to allow for the liability on a counterfeit card, and in some cases a stolen card, to fall to the merchant.

The liability shift is coming about because of the use of the new EMV or “chip cards” or “smart cards.” EMV (Europay, MasterCard, and Visa) cards are almost the same as the standard magnetic strip cards. However, they are more secure in the fact that they have a small, “smart” microprocessor computer chip embedded inside the card.

Banks and credit unions are issuing the chip cards to consumers now, according to John Mayleben, Michigan Retailers Association senior vice president, technology and product development, and a national expert on electronic payment processing. CRMA has joined forces with the Michigan Retailers to offer members discounted credit card processing rates and first rate services.

Mr. Mayleben advises that if you have not already upgraded your credit card terminal to accept chip cards, you need to seriously consider the impact that not upgrading will have on your business after October 1. While there is no requirement that you upgrade your terminal, failure to do so could expose you to chargebacks you don’t currently see in your business.

If someone pays with a fraudulent chip card and you haven’t upgraded to an EMV reader yet, then you are wholly responsible. You will not be fined if you don’t make the switch. It’s entirely voluntary, but you will be taking a huge risk if you don’t prepare your business for the new changes taking place with credit cards.

We are here to help you if you have any questions about how this new system will work or if you are having any problems with your terminals. Please call CRMA office 860–527–1044 and we will assist you.