Retailers Demand Answers from Visa Regarding Federal Reserve Ruling

November 17, 2016, Written By John H. Oldshue
Retailers Demand Answers from Visa Regarding Federal Reserve Ruling

Retailers are once again going to battle with a credit card company over the fees charged for processing transactions. The most recent skirmish came after the Federal Reserve said Visa was violating merchants’ legal rights to choose which company would process debit card transactions.

The conflict started last year when the credit card industry began implementing EMV technology. Since retailers installed the new card readers, debit card users are being presented with a screen that asks them to choose between “Visa Debit” and “U.S. Debit.” If a shopper chooses Visa Debit, the transaction is routed over Visa’s network. Merchants say this network is more expensive, and are bothered that shoppers sign for the transaction instead of entering their PIN, which is safer.

When a shopper chooses U.S. Debit, the transaction is routed through the network of a merchant’s choice. Since the networks have to compete for the merchant’s business, merchants argue this allows them to pay less in debit card processing fees.

On November 2, the Federal Reserve clarified that no payment card network can directly or indirectly force retailers to use technology that will inhibit a merchant’s routing choice. In response, a group of merchant associations, including the Retail Industry Leaders Association, Food Marketing Institute, Merchant Advisory Group, National Association of College Stores, National Association of Convenience Stores, National Grocers Association, National Retail Federation and the Petroleum Marketers Association of America, sent a letter to Visa CEO Charles W. Scharf and CEO-Designate Al Kelly that demanded Visa respond with steps to remedy this situation.

“The roll out of EMV technology has been woefully mismanaged by the card networks…On behalf of millions of merchants and their customers across the United States, we urge you to present a clear and speedy process for resolving this issue that ensures merchants face no additional costs while they remove these non-compliant, confusing customer checkout screens.”

The letter also asserted the Fed’s declaration was in response to “willful steps taken by Visa to circumvent merchants’ legal right” to choose the network over which a debit transaction will be routed;” and “The free market principle of merchants choosing network services and providers is critical to ensuring competition in the debit market. Visa used its overwhelming market share to impose their proprietary EMV chip technology that stifles competition.”

Merchants say consumers should care about Visa’s questionable practices, since higher transaction fees mean they may have to pass on additional costs to customers.

Visa disclosed this week they were being investigated over their routing rules.

The information contained within this article was accurate as of November 17, 2016. For up-to-date
information on any of the terms, cards or offers mentioned above, visit the issuer's website.

About John H. Oldshue

John Oldshue is the creator of He worked for over 15 years in television and won an Emmy award for his reporting. He covers credit card rate issues for
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