Retailer Warnings

Retailers and the SBA Warn About Chip Card Problems

On October 1, a liability shift went into effect for “card present” transactions. The shift encourages businesses to adopt modern “chip” technologies to more effectively combat fraud from counterfeit cards. Chip cards — also known as EuroPay, MasterCard and Visa (EMV) cards — contain tiny metallic squares that generate a unique encrypted code for each transaction. In theory, they’re more secure than magnetic cards when read by an EMV-compliant processing device.

Retailers Speak Out

But many retailers argue chip card protections fall short in the United States, because they don’t require a personal identification number (PIN). Card issuers in Canada and several European, Asian and Latin American countries have seen payment card fraud rates drop significantly after they switched from magnetic cards to chip cards. But cards in those countries require customers to enter PINs.

Some merchants argue that U.S. cards aren’t as protected against counterfeiting as chip-and-PIN cards. U.S. chip cards require only signatures, which are easy to forge — and EMV-compliant card readers don’t authenticate them. To date, no major U.S. credit card issuers have announced plans to switch to chip-and-PIN cards in the near future.

SEC Warns Consumers

The Securities and Exchange Commission (SEC) recently issued a warning about fraud scams being perpetrated against consumers who haven’t yet received a chip card from their bank. These scammers typically email people, pretending to be their card issuer, and request updated account information. Unwary cardholders click on an official-looking link and provide personal information, which perpetrators use to commit identity theft or install malware on the cardholder’s device.

The SEC urges consumers to contact card issuers at the phone numbers listed on their cards, rather than to respond to unsolicited emails (or phone calls). If you receive a suspicious request for personal information in connection with the issuance of a chip card, contact your credit card company as soon as possible.

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