EMV Cards & Liability for Consumers

EMV stands for Europay, Visa, and Mastercard, the three companies that originally created the idea of the EMV chip card where card information is stored in a chip embedded in the front of the card. (Traditional debit and credit cards have the information stored on a magnetic stripe on the back of the card.). The authentication parameters with the EMV cards change with each transaction where the magnetic stripe cards maintain the same card information, thus making it much more difficult to counterfeit an EMV chip card. The technology is only beneficial for "card present" situations where the card is physically presented for a transaction and the merchant has the point-of-sale terminal that can communicate with the EMV card chip. Online Internet transactions would not have any additional security enhancements from the EMV chip cards. Verified by Visa or MasterCard's SecureCode are the best tools available to prevent online card fraud.

Card issuers are still in the process of issuing EMV chip cards and merchants are installing EMV point-of-sale terminals that can read the EMV chips. North Alabama Educators Credit Union will have a mass card EMV card reissue of all member debit cards in the spring of 2016. Roughly only 20% of merchants have installed the EMV chip readers at this point.

The focus of the EMV card technology was about reducing fraud and shifting liability. What does this mean to the consumer in terms of liability? In short, nothing should change from a liability standpoint. The liability shifts being discussed have been between the merchants and the card issuers who are the financial institutions. The credit union has not charged our membership for any portion of unauthorized charges even though VISA rules and government regulations allow for consumers being responsible for the first $50.00 per fraudulent incident for fraudulent charges. One concern that I have is if the liability for a fraudulent charge is shifted to the merchant, it would not surprise me to see that $50.00 cost be passed on to consumers, possibly more if the fraud is not reported promptly;

• up to $500 if you fail to notify the bank within two business days after you realize the card is missing, but do notify the bank within 60 days after your bank statement is mailed to you listing the unauthorized withdrawals. 

A banking financial institution has an ongoing account relationship with a consumer. A retailer two states away does not share that same relationship so if they have liability for a fraudulent transaction, they will most certainly hold the consumer responsible for the first $50.00 in their reimbursements for unauthorized charges. Time will tell how the liability shifts between the merchants and the institutions will impact any costs passed on to the card consumer. If there were to be $50.00 fraud liability costs passed on to the members by the merchants, it would be guess that the credit union would absorb that $50.00 cost since we have already been doing so. Rest assured that many traditional banks out there would not be doing that. 

More information on our EMV cards to be issued in 2016 will be provided to our cardholders during the first quarter of 2016. In the meantime, member liability for unauthorized transactions still remains a $0.00 liability for our credit union members.