Lawmakers Hear About Delays with Credit Card Chip Readers

By Brenda Flanagan

If you’ve tried to use a new, chip-enhanced credit card recently and found the machine wasn’t working, you’ve got company: specifically, Assemblyman Paul Moriarty, whose attempts to charge-by-chip went nowhere at three big-name stores.

“At each one of them I asked to use the chip technology and I was told, ‘You can’t. You have to slide it, swipe it, we’re not using that right now.’ So I’m not sure what the hang-up is, what the problem is,” he said.

To find out, the chairman of the Assembly’s Consumer Protection Committee invited a panel to explain what’s up.

Last fall, credit card companies required retailers to switch to new chip-card readers by an Oct. 1 deadline. Businesses that didn’t switch would become liable for any losses due to fraud. Shops scrambled to install the new machines — often at $1,500 to $2,000 a pop.

Here’s the bad news for retailers.

“What we’re hearing from our members who’ve installed the equipment is they have been waiting — in some cases, months — for someone from the card company to come out and certify that they can turn on the machines for the readers,” said Paul Martino, vice president of the National Retail Federation.

“That sounds awfully odd that they’d put millions of these things out there and then they have to have someone physically come out and check each one? As opposed to just making it work from day one, where someone puts in the card, and it works,” Moriarty said.

The banking and chip card machine industries called the switch to chip cards a mammoth undertaking and disagreed that on-site certification had bolluxed up the process.

“No one comes from the card networks to certify it on-site. But the software solution does need to be certified, that it won’t defeat the security parameters that have been put in place by the system. And of course, that takes time, in the same way if you go Christmas shopping on Dec. 24, there’s going to be a line and the item you want may not be available,” said Jason Oxman, CEO of Electronic Transactions Association.

Meanwhile, retailers waiting for their machines to be activated are on the hook for any fraud.

“If you have the hardware sitting in your store but it’s not turned on and there’s a fraudulent transaction, the liability will fall on the retailer’s shoulders, unfortunately. The banks have done a masterful job in protecting themselves from fraud and liability. Unfortunately, they’ve just shifted everything over onto the retailers,” said John Holub, president of the New Jersey Retail Merchants Association.

“We think it’s unfair. We think there should be a safe harbor for retailers that have taken the necessary steps to become chip-enabled but through various software delays haven’t been able to do so,” said Mary Ellen Peppard, assistant vice president for government affairs at the New Jersey Food Council.

“I think we got more questions than answers today. There appears to be mass confusion in this huge rollout of new credit cards,” Moriarty said.

Industry lobbyists say consumers are protected in case of fraud. Those charges are covered. But that’s cold comfort for anyone who’s ever had to deal with getting their credit card hacked.