- What is this lawsuit about?
This lawsuit aims to hold the credit card giants accountable for imposing on millions of American merchants a so-called “liability shift” that is costing them billions. Before October 1 of last year – a date that the Defendant credit card processors, EMVco and the card issuers arbitrarily selected – chargebacks for fraudulent charges were borne by the banks (in the case of Visa and MasterCard) or the companies (in the case of American Express and Discover) who issued the credit cards. In fact, this so-called “fraud protection” is a big selling point in getting consumers to use the cards.
It’s something you’ll see featured in commercials for these cards. But after October 1 of last year, many of those chargebacks are now being imposed on American merchants, and there wasn’t a thing they could do to stop it.
What happened was that the Defendants wanted to move to a new type of credit card – a card with a so-called EMV chip – and they told merchants to go out and buy the machines and software needed to process the chip cards, and to have everything ready to accept the new cards by October 1, or have this liability shift imposed on them. The problem is that the equipment and the software is no good unless it’s “certified” by the defendants – and they aren’t getting that done. So you have a circumstance where the very people who benefit from a delay in certifying the system – because they can shift the liability to someone else – are the people in charge of doing the certifying.
And it’s worse than that. The Defendants knew that most merchants couldn’t be ready on time. Why? Because various merchant groups TOLD the Defendants this wasn’t going to work and asked for more time. And, to make matters worse, the Defendants have done nothing to compensate the merchants – such as lowering any of the other fees the merchants pay to accept the cards.
- How many merchants could there be in the class?
We are not exactly sure yet, but we do know that something like 8 million merchants accept payment cards. Certainly there are millions of merchants like our clients – in every imaginable business – who are in the same position.
- How much are the potential damages?
Many billions of dollars. Our current named class representative suffered about $10,000 in damages in a little over four months. When you start to multiply that times the millions of merchants in the same position, the numbers begin to mount up.
- What do you want from the Defendants?
We want them to have to pay for the losses they have caused, but we also want them to stop imposing the liability shift at all. We also want them to ensure that no similar liability shift is going to be imposed on merchants in the future, by seeing to it that the certification process works more rapidly and reliably. It’s not fair for the merchants to bear these costs for fraudulent charges – and, in turn, for the banks to benefit by being spared costs they are supposed to bear – if there is no way for the merchants to comply with the new system. That’s why we are asking for more than money; we’re asking for the Court to require the Defendants to act fairly.
- Who are the current named plaintiffs?
B&R Supermarket and Grove Liquors, family-owned businesses in south Florida. B&R operates four Milam’s Market stores – medium-sized, upscale grocery stores. Grove Liquors has a single location. These stores did everything they were supposed to do to get ready for the EMV chip cards – installed the new machinery, got the software they needed – only to find out they couldn’t get the Defendants to certify them – or even to tell them when they might get certified. From October 1, 2015 onward, the stores have gone from having to pay virtually no chargebacks to having to pay scores of chargebacks that the card issuers would have paid before that date. And nothing they could have done would have prevented that. We believe many other merchants are in the same situation.
- But aren’t the new cards supposed to minimize fraud and isn’t that good for everyone?
The answer to that is yes – and no – and not exactly. Throughout much of the rest of the world, including Europe, payment cards have been shifted over to those containing an EMV chip. Those changeovers took place as long as a decade ago. Because that chip creates a separate record of every transaction, and because of its physical features, it is harder to lift the information from the card and make a fraudulent card. Also, thanks to the system in use in Europe – called chip-and-PIN, where a consumer presents the card and then enters unique personal identification number to validate the transaction – transactions made with the card are more secure. But in the US, the Defendants are actually imposing a less secure system, called chip-and-signature, that won’t do as much to fight fraud. And what’s worse, during this time of chaos, where so many merchants cannot get the Defendants to certify their systems, there’s some evidence that fraud is actually increasing as clever criminals take advantage of the situation. Meanwhile, card issuers are still touting “fraud protection” to card users, but now make the merchants pay.
- What is EMVco?
First of all, EMV comes from Europay/MasterCard/Visa. EMVco is a Delaware company owned and overseen by the credit card networks, which, among other things, develops and manages the technical standards processing EMV chip transactions. In simplest terms, EMVco is the company that set the rules for the EMV chip card changeover and decided on the date for the liability shift, but it is owned and run by companies that are benefiting from the fact that the changeover isn’t working and that our clients and the rest of the merchants couldn’t escape the liability shift.