The Fraud Liability Shift

The 2015 U.S. Fraud Liability Shift

If a consumer used a counterfeit credit card in a retail location, it used to mean that the card issuer was liable. However, beginning in October 2015, the U.S. went through a fraud liability shift. That liability has shifted to the merchant if they have not replaced or upgrades their processing systems to use the new chip-enabled devices and applications such as EMV Terminals.

An in-depth explanation of this liability shift is provided in the EMV Migration Forum white paper called “Understanding the 2015 U.S. Fraud Liability Shifts.” The white paper also outlines that in a chargeback that party that supports the most secure technology will prevail. If there is a tie, the liability will remain with the issuer. The bottom line is if you are a business that accepts credit cards in person from your customers, and you are not processing those chip cards via the chip-enabled EMV Terminal 100% of the time, then your business will be liable for those transactions.

Recent Developments

When the Fraud Liability Shift occurred, only 27% of US businesses had implemented EMV terminals. Some small businesses have been hesitant to upgrade to an EMV Terminal because they claim they know all their customers and their customers would never use a counterfeit card at their business. However, new information shows that businesses could still lose out on sales even if they have a trusted customer base. A business can be liable if the card is a counterfeit card, but some processors have also reported seeing instances of transaction disputes that are initiated by the card-issuing banks. Usually, a cardholder will dispute a transaction with the business that processed the charge if the cardholder believes it is a fraudulent charge. However, the banks that issue the cards, if they think a transaction is fraudulent because a transaction is out of the ordinary geographic location of the cardholder, can and have been initiating disputes and chargebacks to businesses that process their chip card over the magnetic strip without the use of an EMV Terminal.  This means that a business without a chip reading EMV Terminal could lose funds in a chargeback dispute even if the customer and the card being used are all part of a legitimate sale experience, and even if the cardholder wants to pay the business! The business is left trying to collect payment from that customer from another means.

The Importance of an EMV Terminal

There is a lot changing in regards to payment processes and who will be responsible in the event of fraud. Now, PayJunction is offering a FREE Smart EMV Terminal to any business that processes over $25,000 in sales per month. This Smart EMV Terminal will not only keep organizations 100% protected from fraudulent cards, but it will also accept NFC mobile payments (when customers pay with a mobile wallet on their smartphones or smartwatches) and it will capture and store digital signatures to reduce your paper usage and protect you from cardholder disputes and chargebacks. For merchant account pricing and sign-up details for your FREE Smart EMV Terminal, Click Here!

March 23, 2016