Visa counter sues Wal-Mart over debit card procedures

Visa has filed a countersuit against one of its biggest customers, Wal-Mart Stores, claiming the retail giant secretly began testing card procedures at checkout that eliminated the need for signature verifications when Visa debit card is the payment mode.

The suit comes a month and a half after Wal-Mart filed suit against Visa claiming the “signature only” requirements advocated by Visa were riskier than the chip-and-PIN authorization retailers have been widely adopting.

The countersuit was filed in New York state on Wednesday (June 29). In the filing brief Visa said Wal-Mart has been insisting that customers use their PIN verifications at checkout. Visa claims the PIN-only policy resulted in a significant drop in debit card transactions at Wal-Mart Stores along with a number of consumer complaints when they couldn’t use their debit cards at Walmart stores without a PIN.

Visa claims in the filing that Wal-Mart agreed to processing terms in 2015 after the companies negotiated a deal which allowed for customers to chose signature or PIN verifications at checkout.

“Walmart is attempting to avoid its obligation for signature option for their customers when paying with a Visa debit card,” the filing states.

Wal-Mart stands by its position to have rightfully insisted on the use of PINs for debit card transaction in its store, according to Randy Hargrove, spokesman for Wal-Mart. He said Visa has continued to demand the more fraud-prone signature verification because it’s more profitable to them.

In the previous Wal-Mart suit the retailer said that debit cards account for 70% of all card purchases at its stores.

Visa claims that Walmart has taken away the consumer’s right to chose the verification method they want by requiring the use of PINs.

Wal-Mart is not the only retailer taking aim at Visa. Kroger recently filed suit against Visa claiming the payment network has threatened to raise fees and cut of the grocer’s acceptance of debit cards due to a dispute about the requirement of PINs to verify debit card transactions.

Kroger said it has already been fined $7 million by Visa over the dispute that has been brewing for several months. The issue at hand is that Kroger wants customers to use PINs because they are less risky for theft and they can be routed through other networks besides Visa. Kroger said that Visa wants to require that its payment terminals be reconfigured and that debit card transactions only be routed through Visa’s network.

Last year Kroger said its Visa debit-card transaction totaled $29 billion, and that if Visa is successful in cutting off its ability to accept debit cards the effect would be catastrophic to its business.

Lawsuits between Visa and retailers are nothing new. A New York appeals court recently rejected the $7.25 billion settlement between Visa and Mastercard with retailers over credit card transaction fees in 2014. The 2nd U.S. Circuit Court of Appeals made the ruling on Thursday (June 30). The appeals court said the plaintiffs, some 12 million merchants, were inadequately represented and had no opportunity to opt out of the deal.

Wal-Mart opted of the deal and settled with Visa in 2015. The terms of the settlement were not disclosed. More than 50 retailers along with Target and Macy also opted out the class action settlement which the National Retail Federal described as “deeply flawed.”