American Express offers olive branch to merchants over EMV liability costs

The credit card company will no longer hold merchants responsible for fraudulent credit card charges less than $25.
Written by Natalie Gagliordi, Contributor

American Express said Wednesday it would change its EMV chargeback policy to limit the costs of fraudulent credit card transactions for U.S. merchants.

The credit card company will no longer hold merchants responsible for fraudulent credit card charges less than $25. By year's end, AmEx said it will limit the number of counterfeit fraud chargebacks to 10 per card account, with liability for any remaining fraudulent charges shifting to the card issuer.

The previous EMV policy, implemented on October 1, 2015, required the party with the less secure form of technology be responsible for the costs of fraud. For instance, if a retailer failed to update its POS terminals and backend software to begin accepting chip cards, then it's the retailer who becomes liable for incidents of fraud, not the credit card issuers.

The new policy will go in effect at the end of August and remain in place until April 2018.

"We recognize the migration to EMV in the U.S. is an effort that will take time, which is why we are making these policy changes in order to provide flexibility to those merchants that may need more time to upgrade their point-of-sale terminals to accept EMV chip cards," said Mike Matan, vice president of AmEx's global network business, in a statement.

AmEx's olive branch to merchants comes less than a week after fellow credit card giants Visa and MasterCard also said they would work to limit the EMV migration costs for merchants. Visa chose to start blocking all chargebacks under $25, however MasterCard is only offering to monitor chargebacks to make sure they don't become too excessive. Both companies also rolled out new incentives to help spur EMV adoption.

Still, it's unlikely that either effort will do much to appease merchants. While AmEx insists that 40 percent of its counterfeit fraud chargebacks involve purchases of less than $25, this new policy has relatively limited impact outside of small-ticket merchants.

Last week, DIY retailer Home Depot filed an antitrust lawsuit against Visa and MasterCard, claiming the companies sought to block the adoption of chip-and-PIN on credit card transactions following the migration to EMV last October.

Home Depot also contends that Visa and MasterCard chose to enforce the less-secure chip-and-signature standard because the networks collect higher merchant fees for routing signature-based card transactions as opposed to PIN.

According to data compiled by the U.S. Federal Reserve, transactions routed over Visa's or MasterCard's signature debit networks cost more than twice as much as transactions routed over PIN networks.

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