Chip Card Compliance Should be on Your Practice's Radar

Nearly half the world’s credit card fraud occurs in the United States, and recent credit card data breaches experienced by national retailers have pushed the issue more prominently into the media.

Improved protection for consumers

As a result, the United States is moving toward a new credit card payment system, known as Europay, MasterCard and Visa (EMV), which is already used by much of the rest of the world. The familiar magnetic strips on the back of your credit and debit cards are slowly being replaced by a newer chip and PIN system. The metal computer chip on the front of the card stores data more securely. Each transaction has a unique code so that if data is breached and thieves get the code, it cannot be used for another purchase.

Instead of swiping, users will insert the card into a slot on the front of the updated point of sale (POS) hardware (also known as your credit card terminal). While consumers will continue to have the ability to sign for now, the move will be toward using a PIN on the hardware’s number pad – even for credit cards. For the time being, chip cards will also have a magnetic strip in case the new swiping technology is not available on the merchant’s POS hardware.

Not being in compliance could be costly.

 

This change is occurring now in the United States and it doesn’t just affect consumers.

Merchants and practices that don’t have upgraded POS hardware to accommodate the chip card technology may be liable for fraudulent chip card transactions. Formerly, banks were responsible for refunding fraudulent transactions, whereas that liability will now be held by the party that is the least EMV compliant. This liability shift will begin taking effect in October 2015. For instance:

  • If your practice is using old POS hardware and the customer uses a chip card, the practice can still process the transaction using the old swipe and sign technology, but the merchant would be responsible for refunding any fraudulent transaction.
  • If the practice has upgraded to EMV technology, but the financial institution hasn’t issued a chip and PIN card to the customer, the liability would fall to financial institution.

Be aware of these target dates related to the liability shift for chip card compliance:

  • October 1, 2015 – Visa, MasterCard, American Express and Discover liability shift for POS terminals.
  • October 1, 2016 – MasterCard liability shift for ATMs.
  • October 1, 2017 – Visa, MasterCard, American Express and Discover liability shift for pay-at-the-pump gas stations. Visa and American Express liability shift for ATMs.

Next steps

It is estimated that in one to two years, you will not be able to take the card from customers as a result of the switch to the PIN system. In light of this, you’ll want to consider the following:

  • Office staff won’t be able to take the credit cards and process them for the customer
  • Credit card transactions over the phone and internet will not change much
  • Batch out every night. The longer you wait, there is an increased risk of fraud – which in turn could increase the rate of your credit card fees.
  • Meet with your credit card processor once a year to review your account
  • New businesses will want to be PCI compliant from the start.

By fall, millions of cards will be replaced and the switch to using PINs is slated for October 2015. Start now to ensure you’re ready for the transition. The Dental Advisory team at Schenck can assist you with finding the right questions to ask your credit card processor.


Deborah Bukouricz, CPA, is a member of our Retail and Small Business industry teams. Debbie works with restaurants and other closely-held businesses providing accounting, payroll, tax and business planning, and consulting services. She also has experience with QuickBooks and Sage 50 software.

Mark DeBroux, CPA, is a shareholder and member of Schenck’s Health Care Reform, Dental Advisory Team and Health Services teams. Mark specializes in providing accounting, tax planning, consulting and administration services to independent health care providers throughout Wisconsin and Upper Michigan.



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