Author Topic: Chip & pin credit card charge backs for business?  (Read 2903 times)

jeromedawg

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Chip & pin credit card charge backs for business?
« on: April 25, 2016, 06:38:14 PM »
Hey all,

So my in-laws recently got a charge back from a customer who dined at their restaurant recently. Apparently, the customer had a newer chip & pin card but my in-laws don't have a chip & pin terminal so they swiped it. Initially, the letter *seemed* to read as though the customer claimed a fraudulent charge, but when my wife called to follow-up, she was told that some banks may actually initiate these charge backs on behalf of customers. None of that really makes sense to me at all. Basically, merchants are at the mercy of customers and [certain] banks in this case... what's strange is that this is the first occurrence of something like this happening to them. Although, I guess there was some mandate in place starting October 15th which seemed to strongly encourage all businesses to convert their readers to chip & pin.

Unless this particular customer knows that this is a loophole and abused it to get a free meal. 

Have any of you heard of or seen this before?

hops

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Re: Chip & pin credit card charge backs for business?
« Reply #1 on: April 25, 2016, 06:42:50 PM »
There was an article in the New York Times recently about a retailer who suspected some customers were gaming the system:

http://www.nytimes.com/2016/03/23/business/chip-card-payment-system-delays-frustrate-retailers.html

jeromedawg

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Re: Chip & pin credit card charge backs for business?
« Reply #2 on: April 25, 2016, 07:05:41 PM »
There was an article in the New York Times recently about a retailer who suspected some customers were gaming the system:

http://www.nytimes.com/2016/03/23/business/chip-card-payment-system-delays-frustrate-retailers.html


Thanks, fraud seems likelier here. And probably the reason they haven't seen this more is because it's relatively new but likely not many ppl know about it or are just honest. I really don't buy into the explanation about how some banks absolutely don't allow swiped transactions and if they see one immediately charge it back on behalf of the customer.

I guess the only protection against this is for the waitstaff and my in-laws to be extra diligent about advising customers that they don't accept chip & pin and to avoid accepting them... Problem is, it seems like ALL issuers are moving over to chip & pin, so it seems unavoidable. I can't believe the industry obviously knows this is a problem yet is dragging their feet and avoiding doing anything.

lbonga1

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Re: Chip & pin credit card charge backs for business?
« Reply #3 on: April 25, 2016, 07:18:59 PM »
I'm not sure why the bank would automatically issue a charge-back; that part seems strange to me. But the mandate that was issued essentially shifts the liability from the bank to the merchant.

"Starting October 1, 2015, that liability for fraud shifts from the bank to the store in cases where the bank has provided an EMV credit card but the store has not upgraded to an EMV terminal. The logic behind this is that the credit card issuer did everything in its power to protect the consumer, and the store ultimately dropped the ball, so to speak. This creates the incentive for both the bank and the store to upgrade to EMV so the bank can avoid refunding fraudulent transactions and the store can avoid losing money on fraudulent transactions. If neither the credit card nor the store is EMV-ready, then the traditional liability rules apply." -NerdWallet

It seems very likely that the customer is committing fraud in the sense that they actually did have a meal in the restaurant, but from what I understand, your in-laws will still be liable since they didn't use the correct card reader.

I don't know what kind of payment system your in-laws have in place, but have the considered using Square? I use them for my business, and the customer service was excellent the one time I had to deal with a chargeback. They covered me regardless of what the bank's decision was because I provided sufficient proof that the customer actually made the purchase. Their reader for the chip cards is cheap too; it's $25.

jeromedawg

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Re: Chip & pin credit card charge backs for business?
« Reply #4 on: April 25, 2016, 07:53:44 PM »
I'm not sure why the bank would automatically issue a charge-back; that part seems strange to me. But the mandate that was issued essentially shifts the liability from the bank to the merchant.

"Starting October 1, 2015, that liability for fraud shifts from the bank to the store in cases where the bank has provided an EMV credit card but the store has not upgraded to an EMV terminal. The logic behind this is that the credit card issuer did everything in its power to protect the consumer, and the store ultimately dropped the ball, so to speak. This creates the incentive for both the bank and the store to upgrade to EMV so the bank can avoid refunding fraudulent transactions and the store can avoid losing money on fraudulent transactions. If neither the credit card nor the store is EMV-ready, then the traditional liability rules apply." -NerdWallet

It seems very likely that the customer is committing fraud in the sense that they actually did have a meal in the restaurant, but from what I understand, your in-laws will still be liable since they didn't use the correct card reader.

I don't know what kind of payment system your in-laws have in place, but have the considered using Square? I use them for my business, and the customer service was excellent the one time I had to deal with a chargeback. They covered me regardless of what the bank's decision was because I provided sufficient proof that the customer actually made the purchase. Their reader for the chip cards is cheap too; it's $25.

Thanks for the insight - that's very helpful in understanding things.

They currently use Global Payments for their payment processing. But they are a sit-down restaurant too so I'm not quite sure how Square would work out in that situation. Are there special provisions or a particular setup where Square can accommodate for this?

lbonga1

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Re: Chip & pin credit card charge backs for business?
« Reply #5 on: April 25, 2016, 08:02:31 PM »
I'm not sure why the bank would automatically issue a charge-back; that part seems strange to me. But the mandate that was issued essentially shifts the liability from the bank to the merchant.

"Starting October 1, 2015, that liability for fraud shifts from the bank to the store in cases where the bank has provided an EMV credit card but the store has not upgraded to an EMV terminal. The logic behind this is that the credit card issuer did everything in its power to protect the consumer, and the store ultimately dropped the ball, so to speak. This creates the incentive for both the bank and the store to upgrade to EMV so the bank can avoid refunding fraudulent transactions and the store can avoid losing money on fraudulent transactions. If neither the credit card nor the store is EMV-ready, then the traditional liability rules apply." -NerdWallet

It seems very likely that the customer is committing fraud in the sense that they actually did have a meal in the restaurant, but from what I understand, your in-laws will still be liable since they didn't use the correct card reader.

I don't know what kind of payment system your in-laws have in place, but have the considered using Square? I use them for my business, and the customer service was excellent the one time I had to deal with a chargeback. They covered me regardless of what the bank's decision was because I provided sufficient proof that the customer actually made the purchase. Their reader for the chip cards is cheap too; it's $25.

Thanks for the insight - that's very helpful in understanding things.

They currently use Global Payments for their payment processing. But they are a sit-down restaurant too so I'm not quite sure how Square would work out in that situation. Are there special provisions or a particular setup where Square can accommodate for this?

They have POS systems too. There's a food/beverage specific section on their website if you want to take a look: https://squareup.com/food-beverage-pos. It looks like they would just need the $99 POS system plus an iPad.

Edit: The $99 is just for the iPad stand/reader. If they want receipt printers and the like, there's additional options.
« Last Edit: April 25, 2016, 08:04:06 PM by lbonga1 »

jeromedawg

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Re: Chip & pin credit card charge backs for business?
« Reply #6 on: April 25, 2016, 08:11:11 PM »
I'm not sure why the bank would automatically issue a charge-back; that part seems strange to me. But the mandate that was issued essentially shifts the liability from the bank to the merchant.

"Starting October 1, 2015, that liability for fraud shifts from the bank to the store in cases where the bank has provided an EMV credit card but the store has not upgraded to an EMV terminal. The logic behind this is that the credit card issuer did everything in its power to protect the consumer, and the store ultimately dropped the ball, so to speak. This creates the incentive for both the bank and the store to upgrade to EMV so the bank can avoid refunding fraudulent transactions and the store can avoid losing money on fraudulent transactions. If neither the credit card nor the store is EMV-ready, then the traditional liability rules apply." -NerdWallet

It seems very likely that the customer is committing fraud in the sense that they actually did have a meal in the restaurant, but from what I understand, your in-laws will still be liable since they didn't use the correct card reader.

I don't know what kind of payment system your in-laws have in place, but have the considered using Square? I use them for my business, and the customer service was excellent the one time I had to deal with a chargeback. They covered me regardless of what the bank's decision was because I provided sufficient proof that the customer actually made the purchase. Their reader for the chip cards is cheap too; it's $25.

Thanks for the insight - that's very helpful in understanding things.

They currently use Global Payments for their payment processing. But they are a sit-down restaurant too so I'm not quite sure how Square would work out in that situation. Are there special provisions or a particular setup where Square can accommodate for this?

They have POS systems too. There's a food/beverage specific section on their website if you want to take a look: https://squareup.com/food-beverage-pos. It looks like they would just need the $99 POS system plus an iPad.

Edit: The $99 is just for the iPad stand/reader. If they want receipt printers and the like, there's additional options.

Hm, that looks pretty good. They would probably need two tablets and kits because they have a register in the front of their restaurant and one at the back (two entrances). My father in-law says that upgrading the current terminals to EMV would cost $800-900 each. It seems like replacing the entire system with Square could potentially end up costing about the same.