FOSTER CITY, Calif. -- Instead of speaking to its chip-and-signature policies, Visa is battling the nation’s largest retailer on grounds of contractual breach, saying Wal-Mart failed to act upon its contractual obligation to allow customers to validate their chip-card payments with a signature.
The credit-card giant recently answered a lawsuit Wal-Mart filed in May, alleging that Visa kept the retailer from freely choosing a debit processor. That act violated the “Durbin Amendment,” part of a larger law governing debit-card interchange fees, according to the Wal-Mart lawsuit.
In its countersuit, the Foster City, Calif.-based Visa said Wal-Mart allegedly required customers with chip-enabled cards to validate their purchases only with personal identification numbers (PINs) to the exclusion of signature verification. Bentonville, Ark.-based Wal-Mart justified the move by saying it was covered by Federal Reserve Board rules enacted under the Durbin Amendment, the Visa lawsuit said. The Visa documents said the assertion was false and that Wal-Mart had to operate under contract law.
The Visa lawsuit went a step further, saying Wal-Mart’s alleged policy actually violated a court ruling saying that consumers were not bound to the Durbin Amendment, so they could choose signature as a way to validate purchases.
Wal-Mart’s actions, the Visa lawsuit said, casts “unwarranted aspersions” as to the security of Visa transactions, saying that fraud on Visa cards has declined by two-thirds in the past two decades despite that transaction volume has increased 1,000%.
Visa claimed that Wal-Mart had no intention of observing the chip-and-signature obligation among many others.
“We filed our lawsuit to better protect the consumer and rightfully insisted on the use of PIN verification in our stores while Visa demands the fraud-prone signature verification, which is more profitable for them,” according to Randy Hargrove, company spokesperson for Wal-Mart. “PIN debit is the only secure cardholder verification [method] in the market today,” Hargrove told CSP Daily News.
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