Prior to October 2015, card-present counterfeit fraud liability resided with credit card issuers. In October 2015, when the EMV liability shift took effect, liability shifted to the party that had not enabled chip – the merchant or card issuer. In some cases, merchants have been unable to implement EMV terminals due to EMV software certification delays and are bearing the cost of counterfeit fraud while they wait. As a result, both Visa and American Express (as of 06/28/2016) have extended temporary modifications to the EMV liability shift. It’s possible that other payment card brands may follow suit with similar EMV related chargeback modifications in the near future.
The current updates will help alleviate the effect of the liability shift on merchants that have yet to enable EMV acceptance as follows:
- $25 Minimum Transaction: some merchant segments are disproportionately affected by low-dollar EMV chargebacks. The $25 limit covers 36 percent of U.S. domestic counterfeit chargeback transactions and 5 percent of counterfeit fraud dollar volume. Limiting counterfeit chargebacks to at least $25 through April 2018 provides significant relief to merchants while still providing incentive to implement EMV. This adjustment will be effective 07/22/2016 – 04/13/2018 for Visa and by the end of August 2016 through April 2018 for American Express.
- 10 Chargeback Maximum: limiting chargebacks to 10 counterfeit transactions per payment card account, with issuers assuming liability for all fraudulent transactions on the account thereafter, reinforces the responsibility issuers currently have to detect and act quickly on counterfeit fraud. This change is focused on a small percentage of accounts with a high number of chargebacks and is expected to reduce counterfeit chargeback transactions by 4 percent and counterfeit fraud dollars by 11 percent. This adjustment will be effective 10/15/2016 – 04/13/2018 for Visa and by the end of 2016 through April 2018 for American Express.
Although American Express has yet to release specific operating details, Visa has indicated that their modifications will be enforced primarily through system blocks which will preclude card issuers from sending chargebacks fitting these parameters.