Visa Under Investigation for Debit Routing Practices

SAN FRANCISCO — Visa Inc. is under scrutiny by the Federal Trade Commission (FTC), the Federal Reserve and the retail community for its handling of the EMV migration.

In a Nov. 2 declaration, the Federal Reserve said no payment card network can directly or indirectly force retailers to deploy a technology or enforce a rule that inhibits merchant routing choice, and that any technical specifications that inhibit merchant routing choice do not comply with current regulation. This was followed this week by Visa's disclosure that the FTC is investigating the financial services company's rules related to routing. 

In response to these developments, merchant associations representing thousands of U.S. merchants sent a letter to Visa CEO Charles W. Scharf and CEO-Designate Al Kelly stating that the Fed declaration came in response to "willful steps taken by Visa to circumvent merchants' legal right" to choose the network over which a debit transaction will be routed.

The letter was signed by leaders of the Retail Industry Leaders Association (RILA); Merchant Advisory Group; National Association of College Stores; NACS, the Association for Convenience & Fuel Retailing; National Grocers Association; National Retail Federation; Petroleum Marketers Association of America; and the Food Marketing Institute.

The associations asked VISA to immediately respond with steps to remedy this issue, according to a press release issued this week by RILA. 

"The rollout of EMV technology has been woefully mismanaged by the card networks. … On behalf of millions of merchants and their customers across the United States, we urge you to present a clear and speedy process for resolving this issue that ensures merchants face no additional costs while they remove these non-compliant, confusing customer checkout screens," the letter stated.

"The free-market principle of merchants choosing network services and providers is critical to ensuring competition in the debit market," the letter continued. "Visa used its overwhelming market share to impose their proprietary EMV chip technology that stifles competition."

The letter said the Federal Reserve's recent clarification "calls into question the continued legality of a host of Visa's rules and practices that compelled merchants to install and configure terminals that presented cardholders with a routing option that was limited to Visa and would eliminate merchant control of routing."

As CSNews Online previously reported, San Francisco-based Visa made major changes to its EMV merchant liability policies. Of greatest significance to convenience store retailers, effective July 22, Visa began blocking all U.S. counterfeit fraud chargebacks under $25. In addition, as of October, issuers are limited to charging back 10 fraudulent counterfeit transactions per account, and assume liability for all fraudulent transactions on the account thereafter. This reinforces the responsibility issuers already have to detect and act on counterfeit fraud quickly. These blocks will stay in effect until April 2018.

EMV is an acronym for Europay, MasterCard and Visa, the three companies that originally created the security standard. Under EMV liability shift deadlines, c-store retailers needed to upgrade their point-of-sale devices to accept chip-and-PIN cards as of Oct. 1, 2015. A similar liability shift took place on Oct. 1 of this year for ATM machines and will take place Oct. 1, 2017 for automated forecourt devices.

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