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Visa and American Express Temporarily Ease EMV Chargeback Liability for Merchants

Announcements from three of the major card associations in June describe different approaches for reducing merchant liability and losses with counterfeit card fraud through April 2018 as the U.S. transitions to EMV. Visa estimates their changes will lead to 40 percent fewer chargebacks and 15 percent fewer dollars being charged back to merchants related to counterfeit card fraud.

All of the card associations have recently announced measures to speed up and ease the transition to EMV or Chip cards. This includes “Quick Chip” programs from Discover and American Express to not require consumers keep their cards in the readers for an extended period of time, as well as accelerated and streamlined implementation procedures for merchants and acquirers to certify with Visa and MasterCard. Additionally, to ease the burden of fraud losses from merchants during this transition, some of the card associations are changing chargeback liability rules, at least temporarily.

The first of such announcements came from Visa in a June 16th press release, which detailed counterfeit chargeback policy changes benefiting merchants. Beginning July 22, 2016, Visa will not allow chargebacks for counterfeit card fraud (Reason Code 62) for any transaction under $25. Issuers will absorb these losses, as Visa states that they represent limited financial impact for issuing banks but a great deal of work and expense for merchants and acquirers. Another change, not taking effect until October 2016, is that issuing banks will only be allowed chargeback up to ten fraudulent counterfeit card transactions per card, putting more onus on the issuer to identify and contain the fraud. Merchants will be able to benefit from these liability shift changes through April 2018, while Visa states this will eliminate 40 percent of counterfeit fraud chargebacks and 15 percent of counterfeit fraud losses on Visa cards for merchants nationwide.

MasterCard followed suit with a similar press release four days later. It detailed a faster EMV chip terminal testing certification program eliminating 58 percent of the needed tests as a means to speed up chip adoption (or certification) amongst U.S. merchants. While MasterCard took similar measures to accelerate EMV adoption, they stopped short of offering merchants increased liability shift, saying only that they have “policies in place that limit merchant exposure to excessive chargebacks on fraudulent accounts,” and that such “limits are applicable globally for all types of fraud.”

Just a couple days later, on June 22nd, American Express issued a shorter press release focused just on counterfeit card fraud liability shift changes (they had announced Amex Quick Chip to make EMV transactions faster for consumers just a week prior). American Express extended the same liability shift extension to merchants as Visa: no merchant liability for counterfeit card transactions under $25 and there can be at most 10 counterfeit card chargebacks on a single card account. Coverage for counterfeit transactions under $25 will begin by the end of August 2016, while the ten chargeback limit will take effect by the end of the year. Merchants will also be able to enjoy both increases in fraud liability protection until April 2018.

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