If a consumer presents a chip card and fraud is claimed, who is liable?

In the scenario where a consumer presents a chip card and fraud is claimed, the liability primarily falls on the merchant. This is due to the EMV (Europay, MasterCard, and Visa) liability shift that took effect in the United States in October 2015. Under this framework, liability for card-present transactions using EMV chip technology is typically placed on the party that has not implemented EMV chip card technology.

Merchants who do not have the necessary EMV-compliant systems in place may face liability for fraudulent transactions because they have not taken the necessary steps to protect against card fraud. EMV technology is designed to enhance security by generating a unique transaction code for each card present transaction, making it much more difficult for fraudsters to use counterfeit or stolen cards.

Thus, if a consumer uses a chip card and later claims fraudulent activity, the merchant could be held responsible if they have not adopted the appropriate measures to safeguard against such transactions. This incentive promotes the adoption of secure technology practices among merchants to minimize fraud risk and ensure consumer protection.