Retailers Push For Delay In Implementing New Data Security Features

04/02/2015 01:20 pm ET | Updated Apr 03, 2015

WASHINGTON -- Retail and grocery stores around the country are asking to delay implementation of new security features for credit and debit purchases until after the holiday season.

A letter from the merchant industry to major credit card companies warns that if the features are enabled, customers could face long waits during the next major shopping season. The request for a delay represents a turnaround for the merchants, who had previously argued that Wall Street was dragging its feet when it came to securing consumer data.

The fight comes in the wake of a knock-down, drag-out brawl between Wall Street and major retailers that came to a political head in 2011, when it dominated the congressional agenda in a striking way. One moderate Democratic senator, speaking to The Huffington Post for a story on the battle at the time, said the fight between the two giants had been a legislative education.

“I’m surprised at how much of our time is spent trying to divide up the spoils between various economic interests. I had no idea. I thought we’d be focused on civil liberties, on education policy, energy policy and so on,” the senator said. “The fights down here can be put in two or three categories: The big greedy bastards against the big greedy bastards; the big greedy bastards against the little greedy bastards; and some cases even the other little greedy bastards against the other little greedy bastards.”

Millions, if not billions, of dollars are at stake, as presently the card networks are responsible for reimbursing consumers in the event of fraud or security breaches. Merchants who haven't converted to the new system for data security will be responsible for those reimbursement costs starting in October.

"Heading straight into the holiday season, the busiest shopping time of the year, retailers experience a significant uptick in consumer shopping and must be able to ensure the greatest line efficiencies and system reliability. Instead of swiping a card, the consumer will be required to 'dip' a chip card and leave it in the reader throughout the authorization process," reads the letter signed by Leslie Sarasin, the head of the Food Marketing Institute, a leading lobby for the merchants. "This will add time in lane for checkout and require significant consumer education that undoubtedly will be left to the checker as he/she walks the customer through this new process."

The card companies forwarded the letter, addressed to MasterCard, Visa, American Express and Discover, to leaders on Capitol Hill, citing recent high-profile security breaches at Target and elsewhere.

"FMI is more concerned about the cost of complying with the EMV standards and how quickly they can process transaction than it is about consumers," writes Dan Berger, who runs the credit union lobby the National Association of Federal Credit Unions.

Berger says the retailers haven't made the investments necessary to adopt the more secure system even while they've been beating up banks. In January, the National Retail Federation griped to congressional leaders that "For years, banks have continued to issue fraud-prone magnetic stripe cards to U.S. customers, putting sensitive financial information at risk while simultaneously touting the security benefits of next generation 'PIN and Chip' card technology for customers in Europe and dozens of other markets."

Jason Brewer, vice president of communications and advocacy at the Retail Industry Leaders Association, said his group doesn't agree with FMI's request.

"Contrary to the statement made by Mr. Berger, retailers are spending billions to upgrade terminals to prepare for chip cards, while the banks and credit unions seem willing to roll out a system that is inferior to the one they already use in Europe and Canada to protect consumers," he said. "Our position is very simple. Chip and PIN has been proven to be the most successful in reducing fraud, so why roll out anything less for American consumers?"

FMI, which proposed next August as a reasonable time to adopt the new system, did not immediately return a request for comment.

This article has been updated with comment from Brewer.

CLARIFICATION: Language has been added to reflect that responsibility for reimbursing consumers in the event of fraud or security breaches will fall only to merchants not implementing the new system, and not to all merchants.

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