California Legislation Mandates EMV Technology for Retailers

More than 20 groups, including Visa and MasterCard, oppose the legislation.

June 13, 2014

SACRAMENTO – A California state senate committee voted 5–2 on Tuesday to approve legislation that would require retailers in the state that accept payment cards to implement EMV technology.

According to a report on BankCreditNews.com, the legislation — S.B. 1351, introduced by state Sen. Jerry Hill (D) — would require retailers to provide a means of processing EMV cards as of April 1, 2016. The bill would also require contracts between financial institutions and card networks to include a provision that would require 75% of new or replacement payment cards issued to California cardholders to be equipped with EMV technology.

EMV — a standard for credit and debit card payments originally developed by Europay, MasterCard and Visa — incorporates an embedded chip rather than a magnetic stripe, a system that is more secure. EMV will require significant equipment upgrades for store operators, both inside the store as well as at the gas pumps. (Read more in the May issue of NACS Magazine, “Half Covered.”)

The proposed California legislation has support from the Consumers Union, Privacy Rights Clearinghouse and Consumer Federation of California. Proponents of the legislation maintain that the bill would protect California consumers from breaches and card fraud.

More than 20 groups, however, including MasterCard, Visa, the Electronic Transactions Association, California Independent Bankers, Independent Community Bankers of America, Heartland Payment Systems and California Bankers Association, oppose the legislation. Several of the groups said the bill sets bad precedent by mandating a single method of fraud prevention.

“We are learning of all the ingenious and innovative ways that hackers and fraudsters are employing today, but they continue to get more and more creative,” the groups, including the Association of California Life and Health Insurance Companies, California Hotel and Lodging Association, California Chamber of Commerce and California Restaurant Association said in opposition to the bill. “Unfortunately, this bill ties the hands of the law-abiding companies that need dynamic and innovative methods instead of a one-size-fits-all approach to fight fraudsters and hackers.”

As a result of the committee’s vote, the legislation moves out of committee and back to the full state senate for consideration. Friday is the last day for bills to be passed out of their house of origin.

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