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NRF to Visa: Stop using EMV tech to steer debit to network


Is Visa violating retailers’ “freedom of choice?”

The National Retail Federation, among other retail associations, believe so, claiming that the card issuer is using new Europay MasterCard Visa (EMV) technology to steer debit card transactions to its own processing network. According to the Federal Reserve, this violates merchants’ legal right to competition over who will process the transactions, according to a statement from NRF.

The many credit/debit card readers installed in compliance with the new EMV chip card technology present a screen to debit card users asking them to choose between “Visa Debit” and “U.S. Debit.” When Visa Debit is chosen, the transaction is routed over an expensive network owned by Visa. The consumer is also usually required to use a signature to approve the transaction.

When U.S. Debit is chosen, the transaction can be routed over one of about a dozen competing networks of the retailer’s choice. These networks charge merchants less, and also provide more protection through the use of a Personal Identification Number (PIN). Other alternatives offered by Visa can lead to the same results, even without the screen, the statement said.

NRF believes that the practice steers transactions toward the Visa network and the higher fees charged by Visa, which must be built into the cost of merchandise — a move that ultimately contributes to higher retail prices.

NRF and seven other retail groups, including Retail Industry Leaders Association, said in a letter to Visa CEO Charles Scharf: “We write on behalf of millions of American merchants and our customers who have been enormously impacted by both the undermining of competition and the confusing transition to EMV chip card acceptance. We write seeking information on the immediate steps that Visa will take in response to a declaration from the Federal Reserve Board of Governors that the technical specifications and rules provided to merchants as part of the EMV migration violate federal law.”

Earlier this month, the Federal Reserve ruled that the practice does violate a 2010 debit card reform law that says retailers must be allowed to choose between at least two unaffiliated networks to process debit transactions.

“Such a requirement is not compliant with [the law] because it prevents the merchant from directing the routing of electronic debit transactions,” according to the Federal Reserve.

“Visa charges more and offers less security, while the competition charges less and does a better job of keeping consumers’ debit cards safe,” said NRF’s senior VP and general counsel Mallory Duncan. “We think retailers should be allowed to choose the processor who provides the best value and offers their customers the best protection, and so did Congress when it passed the law giving retailers that right. We want Visa to obey the law.”

NRF also said retailers have been pressured to accept the Visa Debit/U.S. Debit screen because “Visa has instructed companies that certify the installation of EMV terminals that the screen must be shown to be displayable before the terminals can be certified,” the statement said. “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, exposing merchants to huge losses.”

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