WASHINGTON -- The National Retail Federation (NRF) welcomed Visa’s announcement Nov. 22 that it will no longer use EMV technology and rules to improperly steer debit-card transactions to its own processing network following an investigation by the Federal Trade Commission (FTC) and a ruling by the Federal Reserve.
“We’re glad to see Visa has recognized that they have crossed the line,” NRF Senior Vice President and General Counsel Mallory Duncan said. “It’s a shame it took two federal agencies to make that clear. Now the real question is whether Visa will do the right thing by cleaning up the mess they’ve created.”
Visa said today it would no longer require that consumers using a debit card in Europay MasterCard Visa (EMV) chip-card readers be presented with a screen forcing them to select either “Visa Debit” or “U.S. Debit.” For those who choose Visa Debit, the transaction is routed over an expensive network owned by Visa, and the consumer is usually required to use an easily forged signature to approve the transaction, according to the NRF. When U.S. Debit is chosen, the transaction goes over the retailer’s choice from up to a dozen competing networks that charge merchants less but provide more protection by allowing the use of a secret, more secure personal identification number, or PIN.
NRF and other retail groups wrote to Visa last week, asking the company to stop the practice. NRF contends that the screen steers transactions toward the Visa network, and that the higher fees charged by Visa must be built into the cost of merchandise, ultimately contributing to higher prices paid by consumers.
The Federal Reserve ruled earlier this month that the practice violates a 2010 debit-card reform law that says retailers must be allowed to choose between at least two unaffiliated networks to process debit transactions. In addition, Visa disclosed in a filing with the Securities and Exchange Commission that the issue has been under investigation by the FTC since July.
While NRF welcomed today’s move to end the practice, Duncan said Visa should work with merchants and equipment providers to ensure that removal of the screens is not done in a way that voids the certification of retailers’ EMV systems. Under rules unilaterally imposed by the card industry last year, retailers who do not have certified chip-card readers are subject to increased liability for fraud if a chip card turns out to be counterfeit, unnecessarily exposing merchants to huge losses.
NRF is the world’s largest retail trade association, representing discount and department stores, home goods and specialty stores, Main Street merchants, grocers, wholesalers, chain restaurants and internet retailers from the United States and more than 45 countries.