Credit Card Companies Shift Liability to Businesses in Fraudulent Credit Transactions

September 29th, 2015

As of October 1, 2015, credit card companies will be shifting liability for fraudulent transactions to merchants. Credit card companies are issuing new cards called EMV (Europay, Mastercard, and Visa) that will include a microchip to authenticate chip-card transactions and lessen the likelihood of fraud. For small businesses, this means a technology upgrade in credit/debit card systems.

The upgrades are generally affordable, and can protect a small business from thousands of dollars in fraudulent transaction damages, or even going out of business. Not only is the card holder affected by fraudulent transactions taking place in their accounts, small businesses also must have safe guards in place to protect their businesses from such occurrences.

While retailers selling luxury goods are more likely to be fraud targets than small businesses such as delis or coffee shops, putting a chip system in place to prevent fraudulent transactions is a prudent idea for any business owner. Under the new effort, companies such as American Express, Discover, Maestro, Mastercard, and Visa will no longer be liable for fraudulent transactions to businesses that do not incorporate the new system.

Credit card fraud is a serious issue throughout the nation. In 2012, the United States experienced $5.2 billion in losses due to credit fraud loss—equaling nearly half of the world’s total in credit losses.

The card chip is also applicable to orders placed over the phone or on the internet. However, for those small businesses that have not yet made the change, the National Federation of Independent Business has several suggestions to help put safeguards in place for phone or internet orders:

• Make sure to get the correct information exactly as it appears on the card
• Use the address verification service if you suspect a fraudulent billing address
• Be wary if an order is both large and next day delivery
• Validate the order before it is shipped
• Act immediately if fraud is discovered

If you own a small business and have any questions or concerns about your liability for fraudulent credit card activity, contact an experienced business attorney who can advise you. Call Bellavia Blatt, PC at (516) 873-3000 or (631) 224-7000.

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