The liability from the use of fraudulent credit cards is shifting on Oct. 1 from card issuers to merchants.
Card issuers, such as banks or credit unions, had assumed all the liability from counterfeit or stolen credit card transactions.
Under the new rules, merchants who choose to accept payments via the card’s magnetic strip may be liable for any resulting fraudulent purchases if they are not EMV (EuroPay, MasterCard and Visa) chip compliant.
The general rule will be if the card does not contain an EMV chip, the card issuer can be held liable. If the card contains an EMV chip, but the merchant has not adopted EMV chip technology, the merchant can be held liable.
The change in liability coincides with a move to force merchants to adopt new chip technology.
The EMV chip is considered a more secure payment system, compared to over the traditional magnetic strip readers, because it generates a one-time transaction code.
In order to be deemed EMV-compliant, merchants need to upgrade their point of sale (POS) terminals and review their software to ensure both can process the new technology.
Read more about the change at Password Protected Law blog.
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