The EMV Liability Shift - What’s Next? 

Published  on  11/30/2015  by  Spivey, Jackie

​Over the past several years, the major credit card networks (VISA and MASTERCARD) have begun the process of converting credit card usage in the United States to the EMV standard.  The EMV standard is a method of preventing credit card fraud by means of a computer chip installed in the credit card. EMV compatible credit card readers can read, verify and update the transaction codes embedded in the credit card chip and transmit this information securely through credit card networks. By verifying and rewriting codes by use of a computer chip embedded in the credit card, the credit card networks are able to significantly reduce unauthorized and fraudulent credit card transactions.

Effective on October 1, 2015, the major credit card networks (VISA and MASTERCARD) implemented the so-called “EMV Liability Shift.” Under these new credit card network rules, the liability for certain types of unauthorized or fraudulent credit card transactions shifted from the issuing bank and the credit card networks to the party that adopted the lowest level of EMV compliant technology. If, for example, a bank issued a cardholder an EMV compliant card, the merchant had not installed EMV compliant card readers, and an unauthorized transaction occurred at the merchant’s location by use of a counterfeit card, the merchant (and not the issuing bank) is liable for the fraud. While VISA and MASTERCARD network rules do not mandate retailers and other merchants to upgrade their technology to the EMV standard, merchants can run significant risks until they adopt EMV compliant technology.

One effect of the EMV liability shift has been a shortage of EMV compliant equipment that merchants can purchase to avoid the EMV Liability Shift. As the EMV Liability Shift deadline approached, merchants reported that compliant equipment became harder and harder to find, and some merchants are being told that it will take many months for their equipment orders to be fulfilled—running the risk that they will be liable for some fraudulent or counterfeit transactions until the equipment arrives and is installed. As a result, users of the networks are well advised to be on the lookout for new changes in advance of their implementation date. 

One of the big changes in the near future will be the application of the EMV liability shift to ATM transactions. The EMV Liability Shift will affect ATM transactions using MASTERCARD on October 1, 2016, and ATM transactions using VISA on October 1, 2017. Similar to the shift for merchants, ATM owners will be liable for certain types of fraudulent or counterfeit transactions that occur on their ATMs if their ATMs have not been converted to EMV compliant technology. ATM owners should begin planning for the EMV Liability Shift now in order to ensure the equipment they need to avoid the liability shift is in place by October 2016. ATM owners unsure of the risk should discuss their business with an expert to help them assess the need for equipment upgrades.

Roede_Chris_TN.jpgChris Roede works primarily in the commercial real estate and collections area. He frequently works with secured lenders providing advice and analysis regarding troubled asset loans, including assisting with foreclosures, forbearance agreements, deed in lieu transactions, and short sale agreements. He also assists banks and other financial institutions with operational and regulatory compliance issues. He may be reached at or 919.783.2932.

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Tags: Consumer Protection Laws, CFPB, Collections
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