Merchants File Lawsuit Related to EMV Regulations

The suit alleges that MasterCard and Visa conspired to move liability to retailers for credit card transaction fraud.

March 11, 2016

SAN FRANCISCO – An antitrust lawsuit has been filed this week in U.S. District Court for the Northern District of California against the largest credit card companies and banks, The Recorder reports. The suit claims the financial firms collaborated on shifting the liability for illegal credit card transactions from the credit card companies and banks to retailers.

The lawsuit alleges that moving to electronic chip cards (EMV chips) has been fraught with technical difficulties. The complaint also claims the change was used to hide the shift in paying for fraud protection. Retailers not making the October 1, 2015, deadline are now liable for illegal charges that used to be covered mostly by card issuers.

“Merchants were not consulted about the change, were not permitted to opt out, were not offered any reduction of the interchange fee, the merchant discount fee, the swipe fee—or any other cost of accepting defendants' credit and charge cards,” according to the plaintiffs’ lawyers. “The liability shift was unilaterally imposed to the benefit of defendants, with no compensation, consultation or consideration of any kind made to the class members.”

The card issuers and banks “shifted $8 billion of liability to the merchants overnight,” said Patrick Coughlin with Robbins Geller Rudman & Dowd, one of the firms filing the suit. All four major credit card firms as well as close to 12 banks were named in the suit, which was made on behalf of a Florida liquor store and grocery store chain, which had experienced charge-backs related to false payments increase from $89 in the 12 months ending on October 15 to more than $10,000 since that deadline.