IRMA: Your New “Chip and Sign” Credit Cards Are Not Secure Enough

IRMA letterhead logo

September 24, 2015 Catie Sheehan, 217-220-1717


SPRINGFIELD –Many Illinoisans have already received new replacement credit and debit cards in the mail—each with a computer chip to go along with the new credit card rules imposed by financial institutions that will be implemented on October 1, 2015. Banks and credit card issuers say these chips offer enhanced protection for consumers against fraud. “IRMA believes these chip-and-sign credit cards do not do enough to protect consumers from fraud,” said IRMA President and CEO Rob Karr. “There’s a better method out there that utilizes the chip technology, and we should be using that.”

Starting October 1, 2015, there will be major changes in how credit card transactions are processed and who will be responsible for fraud costs. “Illinois retailers are gearing up their stores to be ready to take cards with chips in them; if they don’t make the upgrades for chip technology by October 1, retailers will be responsible for covering fraud instead of the banks or credit card issuer,” said Karr. Prior to this change, banks have been responsible for a share of fraud losses when a counterfeit card is used, and retailers are on the hook when the person using the card is not the authentic cardholder. Consumers will notice the change when they use their credit cards in the way they insert them in the payment terminals instead of swiping and signing.

“We applaud banks for taking a first step, but consumers need to be aware these new credit cards are not significantly safer than their old ones,” said Karr. “Unfortunately, this means consumers are still at risk. Banks took a baby step here. Retailers are investing billions in point-of-sales systems so we are ready to accept the safest possible cards as soon as banks decide to fully protect consumers.”

Instead, IRMA would like to see the “chip-and-PIN” technology used with credit and debit cards to effectively cut down on fraud for consumers, retailers and banks. Karr says retailers believe the shift in liability is unfair because the chip-and-sign cards reduce banks’ limited exposure to fraud but don’t significantly reduce fraud for retailers or consumers.

Chip-and-signature cards require a signature like the former system, but therefore, face the same issues as the old legacy cards such as forgery and replication. “According to the Federal Reserve, chip-and-PIN cards are 700 percent more secure than chip-and-signature,” said Karr. “Despite these concerns, card issuers and financial institutions have chosen the less secure chip-and-signature cards that continue to put U.S. consumers at risk.”

Chip-and-PIN cards credit/debit cards have a chip just like the chip-and-sign cards, but the chip-and-PIN cards hold the cardholders’ personal identification number (PIN) data. To use a card, a customer must enter a PIN number instead of a signature to complete a transaction. Each transaction generates a new code, making the information difficult to intercept and cards almost impossible to counterfeit. Requiring a PIN number for every transaction eliminates fraud based on forgery and renders a stolen credit card useless to a thief who attempts to make a purchase at a local store.

Karr says while the United States is shifting to the unsecure payment method of chip-and-sign, every other G-20 nation has replaced the magnetic stripe cards with chip-and-PIN cards within the last 12 years. Chip-and-PIN technology was first implemented in the United Kingdom in 2003. After it was introduced, credit card fraud in the U.K. plummeted 67 percent within six years due to banks and merchants using chip-and-PIN cards. Since it has been more difficult to compromise the chip-and-PIN cards, criminal elements have focused their attention on the only developed country in the world that does not use chip-and-PIN technology. During this same period as fraud decreased in Europe, data breaches that included credit card fraud in the U.S. increased. In 2012, U.S. consumers accounted for 47.3 percent of worldwide payment card fraud losses. “We have a real problem here,” said Karr.

The retail industry isn’t the only industry that recognizes that a shift to a chip-and-PIN system is imperative to consumer safety. The U.S. federal government has implemented chip-and-PIN for all new and existing government credit and debit cards. As the government and retailers invest in new and more secure terminals at registers, so too must the card issuers and financial institutions provide more safety for consumers.

Card issuers and financial institutions have made conflicting statements as to why they are issuing more fraud-prone credit cards to their American customers. In a recent Wall Street Journal article, a senior executive at MasterCard said many consumers find it difficult to remember a four-digit PIN number. Anecdotally, this argument seems hard to swallow given that millions of Americans regularly enter a four-digit code to use an ATM machine or to unlock their smartphone.

“Chip-and-signature cards do not go far enough to protect American consumers and will continue to make the U.S. an attractive target for criminals who can no longer be successful in compromising credit card data elsewhere,” said Karr. “Card issuers and financial institutions need to join the U.S. government and retailers in adopting the chip-and-PIN model to better protect U.S. consumers.”


About the Illinois Retail Merchants Association (IRMA)

One of the largest state retail organizations in the United States, IRMA serves as the voice of retailing and the business community in state government. Founded in 1957, IRMA represents more than 23,000 stores of all sizes and merchandise lines. From the nation’s largest retailers to independent businesses in every corner of the state, merchants count on IRMA to fight for the best possible environment in which to do business in Illinois.


A Path to Reforming Our Broken Sales Tax System

by Daniel L. Goodwin

 June 2, 2015

By Daniel L. Goodwin

The ingenuity of the American entrepreneur has created an accommodating and diverse consumer marketplace over the past two decades. Through the rise of the Internet and emerging payment-processing innovations, countless businesses have been able to supplement their brick-and-mortar storefronts with an online sales presence. Unfortunately, our country’s sales tax system has not adapted to the convergence of digital and physical commerce. This has resulted in harsh consequences that have lingered on for nearly 20 years in the form of the unfair tax collection advantage that online-only retailers — such as eBay and Overstock — hold over millions of stores on Main Street.

Thankfully, this wrong can still be righted. With renewed bipartisan momentum now in the Senate, it is time for all of our elected officials in Congress to work toward expeditiously passing the Marketplace Fairness Act of 2015. This bill is a path to reforming our broken sales tax system.

To illustrate the anti-competitive elements of today’s marketplace, think about your own shopping experience. When you pay for a new pair of shoes, it is considered a sale — regardless of whether you make that purchase in-person at a local shopping center or online through a boutique’s website.

But unlike your local stores, online-only retailers do not collect sales tax at the moment of purchase. Believe it or not, the onus is on you to report and pay any necessary tax to your state’s department of revenue. It is easy to see why you and the brick-and-mortar stores  in your neighborhood — which are legally required to collect sales tax if the state imposes one — bear the brunt of an unfair system.

As someone who has spent close to 40 years in the commercial real-estate sector, I am increasingly concerned about the inequities in our marketplace. This sentiment is fortunately shared by the group of senators — Michael B. Enzi, R-Wyo.; Richard J. Durbin, D-Ill.; Lamar Alexander, R-Tenn.; and Heidi Heitkamp, D-N.D., as well as others — that introduced the latest Marketplace Fairness Act. They know, much like the rest of us on Main Street, that we cannot accept a sales tax system that hinders American shoppers, businesses and local communities.

For consumers, maintaining the current system prolongs an archaic legal burden and a major shopping inconvenience. Shoppers will remain responsible for tracking purchases made online and then calculating the proper sum owed to their respective states. A failure to follow this process translates to breaking the law under our current system. Additionally, consumers stand to lose over the long-term when local businesses — which offer necessaries, specialty goods and custom items — cannot carry as much inventory or are ultimately forced to close due to the uncompetitive climate.

For brick-and-mortar businesses, the continuation of today’s system is akin to a death sentence. Local stores that must collect a sales tax increasingly function as showrooms for shoppers, who want to examine items and then order the same products online to save 5 percent to 10 percent in taxes. If this trend continues, we will see more businesses closing in our neighborhood shopping centers and town squares; our teenagers will be unable to find traditional part-time work; our neighbors will be unable to find that second job; and our communities will lose time-honored traditions such as Santa Claus sitting in the local department store every December.

For our communities and states, congressional inaction will bring additional economic and social impact. When brick-and-mortar businesses downsize or shutdown due to the marketplace, existing employees face both reduced job security and stagnant wages — plus the community endures weak job growth and an across-the-board reduction in tax revenue. This loss of tax revenue forces communities to make painful decisions, the most common being raising property taxes or cutting back on popular educational, recreational and public works services.

Last but not least, let us not forget the social downside that also comes when businesses can no longer sponsor little league teams, and organizations like the Salvation Army have no stores to stand in front of when advocating for society’s most needy. These are voids that online-only retailers will never be able to fill.

In the coming months, Congress will have ample time to debate the clear merits of the Marketplace Fairness Act and then pass a suitable version of the bill. Our responsibility during this time is to remind elected officials on Capitol Hill just how crucial this legislation is to American shoppers, businesses and communities. This action can go a long way to supplementing the current efforts of the International Council of Shopping Centers, Marketplace Fairness Coalition, NAREIT and hundreds of other local and national trade associations.

With deep experience purchasing and managing large retail shopping centers, I know the central role that commerce plays in supporting our shared American dream. Restoring fairness to our marketplace is an important step toward making that dream a reality for more of us in 2015 and beyond.


Daniel L. Goodwin is Chairman and CEO of The Inland Real Estate Group of Companies, Inc.

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State of the State Address- Illinois


Ryan McLaughlin, 312-588-4102

Statement from the Illinois Retail Merchants Association in Response to Governor Rauner’s State of the State Address

Illinois Governor Bruce Rauner
Illinois Governor Bruce Rauner

SPRINGFIELD – Illinois Retail Merchants Association (IRMA) has issued the following statement regarding Governor Rauner’s State of the State address:

“Governor Rauner has laid out an ambitious agenda reflective of a desire to see Illinois return to the role of an economic leader. We are concerned about proposals to increase the minimum wage as those mandates fall disproportionately on the retail industry, but attempts to offset those costs are welcomed as they recognize such mandates impose significant costs. Retailers will withhold judgment until we see the details, how those benefits accrue to Illinois retailers, and what other proposals may come from the upcoming budget address. We stand ready to work with Governor Rauner and the legislature to help grow the economy and jobs accordingly,” said Rob Karr, President/CEO, Illinois Retail Merchants Association.


Economic facts about the retail industry in Illinois:

  • 144,715 retail establishments
  • 1.6 million retail jobs
  • $65 billion in total labor income
  • $50 billion in direct impact on GDP

About The Illinois Retail Merchants Association (IRMA)

One of the largest state retail organizations in the United States, IRMA serves as the voice of retailing and the business community in state government. Founded in 1957,IRMA represents more than 23,000 stores of all sizes and merchandise lines. From the nation’s largest retailers to independent businesses in every corner of the State, merchants count on IRMA to fight for the best possible environment in which to do business in Illinois.