Those New-Fangled, Chip-Enabled Cards
January 7th, 2016 by Bunch & Brock
Staying one step ahead of criminals who always seem to have limitless resources isn’t easy. According to the fraud research director of financial industry research company Aite Group, every credit card issuer absorbs over $3 billion in credit fraud annually. The latest attempt to thwart cybercriminals in their never-ending quest to steal identities and payment information are microchip-enabled credit cards.
You likely have already received this upgraded card in the mail from your bank, meant to replace the traditional magnetic stripe credit and debit cards. The technology used to authenticate chip-card transactions is known as EMV (Europay, MasterCard, and Visa), which has resulted in the cards being referred to as EMV cards as well as smart cards, chip cards, chip-enabled smart cards, and chip-and-choice cards. It is anticipated that by 2018, every card in your wallet will have a chip embedded in it.
The data on the magnetic stripe cards doesn’t change, meaning that anyone who accesses it gets all the confidential information necessary to make purchases over and over again. The metallic square on the new cards is a computer chip that creates a unique code for each transaction. Instead of swiping for payment, the new cards are inserted into a slot on the point-of-sale terminal and left there while the transaction is processed. The consumer then signs on the terminal screen to take responsibility for payment.
While the new cards are harder to counterfeit, they don’t stop information from being stolen and used to make fraudulent charges. The National Retail Federation believes that the cards don’t go far enough to protect consumers because they don’t require PIN numbers, which connects the payment terminal to the payment processor for real-time transaction verification and approval. In fact, credit card fraud in the U.S. has doubled in the past seven years as criminals have bumped against the PIN roadblock in other countries.
In order for the new cards to work properly, retailers have to purchase and install EMV-compliant point-of-sale terminals. Many large retailers, such as Wal-Mart, Home Depot, Target, and Best Buy, now accept chip cards while many smaller retailers have been slower to adopt the technology. They have a strong incentive to comply. Traditionally, consumer losses from any in-store transaction using a counterfeit, stolen or otherwise compromised card reverted to the payment processor or the issuing bank. As of October 1, 2015, the liability for fraud when a card was present now shifts to whichever party is the least EMV-compliant. If a consumer has a chip card, but has to swipe because the merchant hasn’t upgraded, the merchant is responsible for any fraud that results from the transaction.
To make the situation worse, there are online scammers out there hoping to capitalize on people’s confusion over the new cards. Fake emails by criminals posing as credit-card issuers have been making the rounds. If you get one asking you to confirm personal information or click on a link to receive your updated credit card, don’t do it. Instead, call the number on the back of your credit card and speak to a representative about your concerns. It is important to remain vigilant when it comes to your credit.
The KY consumer fraud attorneys at Bunch & Brock have more than 35 years of experience helping people determine the best course of action for their situation. To get started, or if you have any questions about this topic, call us at 859-254-5522. You can also reach us by filling out this online form.