News

Client Alert: New Credit Card Anti-Fraud Rules Become Effective Oct. 1

Retailers Urged to Upgrade POS Systems

Beginning October 1, 2015, major credit card companies will no longer accept liability for fraudulent charges. Rather, liability will shift to retailers who have not implemented new anti-fraud measures required by credit card companies. When a fraudulent transaction happens at a retail shop, where the merchant has not yet upgraded to a “chip-capable” terminal, that merchant takes the hit, not the credit card companies. However, if retailers update their point of sale (POS) systems, liability may shift to the banks.

Underlying this shift in liability are the new EMV cards–credit cards embedded with microprocessor chips. According to Fortune magazine, of the 1.2 billion credit and debit cards in circulation in the U.S., some 70% will have chips by the end of 2015. For each transaction, the chip creates a unique security code that cannot be used again, which blocks the card’s data from being duplicated. In order to read the chip, retailers will be required to update their POS systems, which could cost up to $500 per machine. Until retailer’s systems are updated, they may shoulder the liability for any fraudulent credit card purchases.

For more information regarding this change, see:

MasterCard Exec: Why the Move to Chip-Cards is so Important, Fortune (July 22, 2015), available at http://fortune.com/2015/07/22/mastercard-security-chip-pin-emv/.

October 2015: The End of the Swipe-and-Sign Credit Card, Wall Street Journal (Feb 6, 2014), available at http://blogs.wsj.com/corporate-intelligence/2014/02/06/october-2015-the-end-of-the-swipe-and-sign-credit-card/.

*BHGR Client Alerts are for general information purposes only and do not constitute legal advice.