Trade Group Asks for Delay on Card-Security Plan -- 2nd Update

By Robin Sidel 

A trade group representing thousands of retail food stores and pharmacies is asking the payment-card industry to delay an October plan that puts merchants on the hook for fraudulent transactions if they don't have equipment in place to accept more secure credit and debit cards.

In a letter sent last week to Visa Inc., MasterCard Inc., American Express Co. and Discover Financial Services, the Food Marketing Institute said that merchants won't be ready to meet an October deadline that will shift liability for fraudulent transactions from card-issuing banks to merchants.

"Regardless of how strong the commitment or how many dollars invested, the reality is that the system will not be ready to meet the card networks' arbitrarily-set mandate for the liability shift in October 2015," according to the letter from Leslie Sarasin, president and chief executive of the trade group. The group asked for the deadline to be pushed back to 2016.

Banks and merchants are racing to issue new cards and install new technology following a rash of high-profile data breaches that has exposed hundreds of millions of consumers to fraud. Regional grocer Supervalu Inc. was hit by one of the breaches last year.

The new cards are embedded with a computer chip that creates a unique code for each transaction, making it harder for thieves to create counterfeit cards. Traditional cards have a magnetic stripe on the back that contains static information about the account holder that can be more easily duplicated in the event of a breach.

The U.S. is one of the last countries to embrace chip cards, which are widely used in Europe, Asia and Canada for years. Merchants must pay to upgrade their current equipment, including hardware and software, to accept the new cards.

Hannah Walker, director of government relations for the Food Marketing Institute, said the group hasn't received a response to its letter. The request for a delay "is not for a lack of commitment at all," she said.

Merchants are facing a 16-week delay for delivery of new equipment that can accept the new cards, according to the letter. The trade group also noted that the new cards, which are dipped into a reader instead of swiped, could add time to the checkout process as the industry moves into the holiday shopping season.

Representatives of MasterCard and American Express said they have no plans to change the date. Representatives of Visa, and Discover didn't have an immediate comment on the request.

The National Association of Federal Credit Unions sent a letter on Thursday to House Speaker John Boehner (R., Ohio) and House Minority Leader Nancy Pelosi (D., Calif.) that criticized the request and urged lawmakers to support "strong data safekeeping standards" for merchants.

Write to Robin Sidel at [e-mail]

Access Investor Kit for American Express Co.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US0258161092

Access Investor Kit for Discover Financial Services

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US2547091080

Access Investor Kit for MasterCard, Inc.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US57636Q1040

Access Investor Kit for Visa, Inc.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US92826C8394

Subscribe to WSJ: http://online.wsj.com?mod=djnwires