WASHINGTON–Visa has announced it will no longer steer debit transactions to its own processing network following an investigation by the Federal Trade Commission and a ruling by the Federal Reserve.
In a statement, Visa said it would no longer require consumers using a debit card in EMV chip readers to be presented with a screen forcing them to select either “Visa Debit” or “U.S. Debit.” For consumers who chose Visa Debit, the transaction had been routed over a network owned by Visa and in which a signature is only required. When U.S. Debit is chosen, the transaction goes over the retailer’s choice from up to a dozen competing networks.
The Visa decision was hailed by the National Retail Federation, which has been advocating for the change. The trade group has argued that the U.S. debit option not only charges merchants less but also provides more protection by allowing the use of PIN.
“We’re glad to see Visa has recognized that they have crossed the line,” NRF Senior Vice President and General Counsel Mallory Duncan said in a statement. “It’s a shame it took two federal agencies to make that clear. Now the real question is whether Visa will do the right thing by cleaning up the mess they’ve created.”
The Federal Reserve ruled earlier this month that the practice violates the law, which says retailers must be allowed to choose between at least two unaffiliated networks to process debit transactions. In addition, Visa disclosed in a filing with the Securities and Exchange Commission that the issue has been under investigation by the FTC since July, the NRF noted.
While NRF said it welcomed the move to end the practice, Duncan said Visa should work with merchants and equipment providers to ensure that removal of the screens is not done in a way that voids the certification of retailers’ EMV systems. “Under rules unilaterally imposed by the card industry last year, retailers who do not have certified chip card readers are subject to increased liability for fraud if a chip card turns out to be counterfeit, unnecessarily exposing merchants to huge losses,” the NRF said.