1. Opinion

Column: How the banks imposed their leaky credit-card security system on merchants and consumers

Even with the new chip cards, U.S. customers still lack the protection of PINs that consumers in the rest of the world punch in during a purchase.
Published Aug. 19, 2016

Credit card companies and their member banks are exploiting small retailers — the backbone of communities across America — through a recent shift to credit and debit cards with embedded computer chips supposed to enhance security.

The banks that issued the cards then shifted liability for fraud to retailers until we adopt their security system. Visa and MasterCard can force this arrangement on retailers because they utterly dominate the nation's payments system.

The change is one of the most flagrant abuses of corporate power we have seen. And — as always with the credit card companies — merchants are at their mercy.

I know this firsthand: I run a general store that opened on Sanibel Island in 1899 and is now the oldest and largest on the island; we operate two full-service supermarkets, a hardware store and a catering company.

My background is in information technology — I joined my wife's family business only a dozen years ago — and I was glad the card companies were finally switching from the magnetic strip, a 1970s technology long abandoned in other countries because it is easily replicated by thieves.

The nightmare started in 2012, when the credit card companies told merchants they must buy machines and software to read the new cards and have these systems ready by October 2015 — or the merchants would then be liable for fraud instead of the banks.

I spent more than $100,000 on upgrading my system, a huge investment for a small business, well before last October's deadline.

But the card companies weren't properly prepared and have yet to certify me and many other Main Street retailers, which means I cannot accept chip cards. And so I'm also now liable for credit card fraud even though I've had the required security system installed for two years.

When will they get to me? I'm told the big retailers come first, then smaller ones like me. But nobody seems to know — all I can do is sit and wait.

Because it has taken so long in the United States for banks and credit card companies to modernize their outdated security system, we are one of the few places left in the world where debit and credit card fraud is growing.

Half the $16 billion in card fraud in the world happened in the United States in 2014, according to the authoritative Nilson Report, even though we have less than a quarter of the world's card transactions.

Our international customers are astonished by the limited use of chip technology.

Even with the chips, U.S. consumers and merchants still lack the added protection of the personal identification numbers that consumers in the rest of the world punch in during a purchase (much like the four-digit PINs Americans use now to withdraw cash from their ATMs).

It's inexplicable why banks and credit card companies would endanger consumers and merchants by depriving them of this additional security.

They say it's because customers just don't want to remember those four digits. Absolutely false.

If the banks would tell their customers that no less an authority than the Federal Reserve says PINs make transactions 700 percent safer, consumers of course would demand them.

Merchants aren't the only people appalled by this mess. Sen. Dick Durbin, the Illinois Democrat, recently wrote to the consortium of six credit card companies that devised the new security system, EMVCo, complaining that they made unilateral decisions for murky reasons without consulting retailers, creating "chaos."

In that respect, EMVCo is very much a creature of the credit card companies, two of which — Visa and MasterCard — are so large that they dominate the market, dictating terms to retailers, raking in huge profits that wind up costing consumers big at the checkout line, and flouting antitrust law.

This is just their latest caper. But it's potentially one of their most harmful abuses.

It's time regulators such as the Federal Trade Commission sorted out this train wreck.

Durbin and a group of 20 House members have also written separately to the commission.

The commission needs to wake up and start protecting consumers and small merchants instead of standing by while the credit card companies and their banks rake in millions of dollars.

Richard Johnson operates Bailey's General Store on Sanibel Island.


  1. 57 minutes ago• Opinion
    Editorial cartoons for Thursday LISA BENSON  |  Washington Post syndicate
  2. Florida Gov. Ron DeSantis is poised to play a key role in advancing three civil rights protections. [CHRIS URSO | Times]
    A federal judge and the governor send positive signals on restoring rights for felons. But the state has more work to do.
  3. Medal of Honor recipients Retired Army Maj. Drew Dix, left, and Ret. Army Sgt. Maj. Gary Littrell pose for a portrait during the start of the Medal of Honor Convention held at the Tampa Marriott Water Street in Tampa, Florida on Monday, October 21, 2019.  OCTAVIO JONES  |  Times
    Here’s what readers had to say in Thursday’s letters to the editor.
  4. Former Ambassador William Taylor leaves a closed door meeting after testifying as part of the House impeachment inquiry into President Donald Trump, on Capitol Hill in Washington, Tuesday, Oct. 22, 2019. (AP Photo/Andrew Harnik) ANDREW HARNIK  |  AP
    William Taylor demonstrates how to stand up for integrity and national purpose, says columnist Timothy O’Brien
  5. Emmett Till, shown with his mother, Mamie, was murdered in 1955 in Mississippi at age 14.
    Courage is why Emmett Till’s legacy is bulletproof. | Leonard Pitts Jr.
  6. Men and boys pose beneath the body of Lige Daniels, a black man, shortly after he was lynched on August 3, 1920, in Center, Texas.  This scene was turned into a postcard depicting the lynching.  The back reads, "He killed Earl's grandma. She was Florence's mother. Give this to Bud. From Aunt Myrtle." Wikimedia Commons
    Trump faces a constitutional process. Thousands of black men faced hate-filled lawless lynch mobs.
  7. Editorial cartoons for Wednesday CLAY BENNETT  |  Chattanooga Times Free Press
  8. Scott Israel, former Broward County Sheriff speaks during a news conference in September. A Florida Senate official is recommending that the sheriff, suspended over his handling of shootings at a Parkland high school and the Fort Lauderdale airport, should be reinstated. (AP Photo/Brynn Anderson) BRYNN ANDERSON  |  AP
    The Florida Senate will vote Wednesday whether to remove or reinstate former Broward Sheriff Scott Israel. Facts, not partisan politics, should be the deciding factors.
  9. An ROTC drill team participates in competition.
    Here’s what readers had to say in Wednesday’s letters to the editor.
  10. On Oct. 17, 2019, White House chief of staff Mick Mulvaney arrives to a news conference, in Washington. On Sunday, Oct. 20, on "Fox News Sunday," after acknowledging the Trump administration held up aid to Ukraine in part to prod the nation to investigate the 2016 elections, Mulvaney defended Trump’s decision to hold an international meeting at his own golf club, although the president has now dropped that plan. (AP Photo/Evan Vucci, File) EVAN VUCCI  |  AP
    Flagrant violations are still wrong, even if made in public. | Catherine Rampell