Merchants Continue to Fight Liability Shift

April 11, 2016 at 8:53 am 1 comment

Over the years, I’ve learned a couple of things the hard way.  One is never underestimate what can happen in the last nine holes of the Masters.  Secondly, never underestimate the legal prowess of merchant lawyers. 

So, it is with a skeptical but weary eye that I reviewed a class action lawsuit (B & R Supermarket, Inc. d/b/a Milam’s Market vs. Visa, Inc., Case No. 3:16-cv-01150-WHA) commenced in federal court in California arguing that Visa, MasterCard and others violated anti-trust law by imposing a timeline on merchants to be capable of processing chip-embedded EMV cards that they “knew” to be impossible to meet.  (paragraph 75 of the Merchant’s complaint).  As a result, the argument goes, since October 1, 2015 merchants have been stuck with the cost of chargebacks for unauthorized transactions that would have historically been the responsibility of issuers (i.e. credit unions and banks).  The merchants are looking for reimbursement of these charges, but fortunately, a preliminary injunction seeking to suspend the liability shift was denied on March 16, 2016.

On the face of it, this lawsuit strikes me as the legal equivalent of the dog ate my homework defense.  Merchants were put on notice of the liability shift by Visa in 2011.  To suggest that they didn’t have enough time to upgrade their equipment is a bit of a stretch.  Many merchants simply made the business decision that the costs of upgrading their terminals to be EMV compliant weren’t justified.  Legalities aside, however, the lawsuit does highlight the challenges that are still being confronted with the integration of EMV chips into the payment system.  For instance, according to the KrebsonSecurity blog, customers can expect EMV enabled card machines to be used in fewer than 1 in 5 face-to-face transactions.  In addition, in fairness to the merchants, there is apparently a backlog to get the upgraded terminals certified for use. 

In a blog later this week, I will be delving into certain chargeback dilemmas.  Stay tuned.  On that note, I am headed to downtown Albany where I hope to see some of you later today.    

Entry filed under: General.

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1 Comment Add your own

  • […] have been complaining about the volume of chargebacks since the change took effect. They even sued Visa and MasterCard to block chargebacks based, in part, on complaints about the certification […]

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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