Does your business take credit cards? If so, when the slip prints out, how
much of the customer’s card number is included? If it’s more than the last five
digits, and/or if the expiration date shows, you need to upgrade your terminal
by Jan. 1.
A federal law passed last December, the Fair and Accurate Credit Transactions Act, requires credit-card “truncation” by that date, and a new state law makes merchants liable, starting in 2007, for any resulting fraud, plus legal fees, if they don’t comply.
Some states, starting with California, have been gradually implementing truncation mandates for new terminals since 2001, but it was only last January that the first laws affecting existing machines kicked in. Some are tougher than Rhode Island’s: In Maine, anyone who didn’t switch by last Jan. 1 is already subject to a $1,000 penalty; in Arizona, as of June 1, merchants who don’t truncate can be fined $10,000.
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For banks and other merchant processors, that means the rush is on to get their customers into compliance. With most terminals, it’s a matter of reprogramming them – a relatively quick software download. But Visa and MasterCard, which have also imposed truncation rules, want older models such as the Verifone Zon Jr. replaced outright.
And because each company has dozens of programs to update, sometimes three or four software versions for a single terminal model, it’s a daunting and expensive process that not all are deeming worthwhile when it comes to older machines.
Some processors have given up on the Verifone Tranz330, for example, one of the lowest-priced models still sold. Others are seizing the opportunity to steal away such companies’ customers by offering to reprogram those machines.
Henry Helgeson, president of Merchant Warehouse, a Boston-based processor with about 17,000 customers nationwide, said early deadlines in some states have ensured that his company has truncation updates ready for all the machines it supports.
But getting to everyone, Helgeson said, takes time. Not trusting customers to read inserts mailed with their statements, his company is calling them individually, he said, and it’s about “90 to 95 percent” done with the process. The vast majority will be updated by mid-September, he said, and the last ones, he hopes, by the Friday after Thanksgiving.
“We don’t want to get in the way of our merchants during the holiday shopping season,” Helgeson said.
NOVA Information Systems, the nation’s third-largest merchant processor, is also still gradually updating its 750,000 customers’ software, according to Michelle Graff, vice president of marketing. Merchants are notified about three months ahead of the deadline affecting them (the federal Jan. 1 cutoff is the latest), Graff said, and they are offered a choice: download new software, or upgrade the whole terminal.
“I would strongly recommend that any merchant that has the old technology upgrade their equipment and at least get into this century,” Graff said. Older models have very little memory and are much slower than newer models, she said. They don’t have nice features such as the ability to issue electronic gift cards.
Most important, Graff said, new models are “more reliable” and far more secure, with key features such as address verification and a way to enter in the extra security numbers on cards. For merchants taking phone orders, especially, having those features can save money, because they’ll pay a lower discount rate (the percentage the processor takes). “The upgrade will pay for itself,” she said.
For customers of some area banks, truncation shouldn’t be a concern – it was long taken care of. FleetBoston Financial, for example, updated its software last year, and so did The Washington Trust Company.
Steven Bessette, senior vice president of retail and lending at Washington Trust, said changing the software for the bank’s 1,000-plus merchant customers was “simple.” And as a bank that also issues credit and debit cards, and has to deal with the cost of fraud, it was common sense to protect cardholders’ privacy.
“It’s a simple, easy, effective preventive measure,” he said.
