New Requirements for Credit Card Processing Requirements – How will they affect your business?

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Merchants of all sizes were required to upgrade their credit card processing technology to avoid liability for fraudulent charges by October 1st. The House Committee on Small Business held a two-part hearing series on implementation of new credit card technology designed to increase security and prevent fraud. This industry-led changeover will require all businesses to use the Europay – MasterCard – Visa (EMV) chip system to process credit card transactions. To affect this change, financial services providers will no longer be liable for instances of fraud if the merchant has not upgraded to the EMV chip system

The hearings offered interesting, and often contrasting, perspectives on this issue. At the first hearing, representatives from the financial industry praised the upgrades and highlighted the protections that the EMV chip system offers. The second hearing, featuring small business owners that need to implement these changes, revealed a much more complex situation. While witnesses at both hearings and the Committee members generally agreed that the EMV system offers more sophisticated fraud protections, implementing these modifications is a significant burden for small businesses.

Despite the outreach efforts of financial firms, small business owners are generally not aware of these changes. According to a recent study about preparedness for this changeover, less than half of small businesses were aware of the October 1st changeover deadline and liability shift.

Small businesses will have to purchase equipment to process sales using the new chips, but the required upgrades do not stop there. Integrating the new technology with point-of-sale terminals, inventory management tools, and other systems could exponentially inflate costs. Given integration, software upgrades, training, and ongoing maintenance, a quick and easy changeover is unlikely.

Please see the links below for several resources for small businesses to prepare them for the change:

http://www.businessnewsdaily.com/8264-credit-card-processing-changes.html

http://www.creditcards.com/credit-card-news/emv-faq-chip-cards-answers-1264.php

http://blogs.wsj.com/corporate-intelligence/2014/02/06/october-2015-the-end-of-the-swipe-and-sign-credit-card/

From The Hill: Dodd-Frank’s Impact on Small Business Lending

By Jake Clabaugh, WIPP Government Relations

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Women entrepreneurs face unintended consequences of wall-street reform. According to a House Committee hearing yesterday, the Dodd-Frank Wall Street Reform and Consumer Protection Act, introduced in an effort to prevent another financial crisis, is contributing to small businesses’ inability to access capital from banks.

WIPP’s Access to Capital Platform has cited some of Dodd-Frank’s regulations as a contributing factor to the decrease in small businesses lending. Capital access is a lifeline for small businesses. It is essential for entrepreneurs to have access to sufficient capital to found and grow businesses.

DF picThe House Committee on Small Business convened lenders and experts to discuss how Dodd-Frank has affected the ability to provide entrepreneurs with critical capital. Access to private capital, including bank loans is a primary concern to women entrepreneurs as women-owned small businesses receive only 4% of private sector lending dollars. Additional regulatory burdens could be exacerbating this problem.

The hearing touched on many of the difficulties WIPP members have experienced when trying to access to capital. The Committee cited increased administrative burdens as a significant cost for small and community banks, a primary lender to small businesses. These regulations have increased the cost of making loans and therefore made it more difficult for banks and borrowers. The result is less capital for entrepreneurs.

The hearing also cited the direct impacts on borrowers. Many that would have qualified pre-recession are no longer able to obtain loans from banks due to tighter lending standards. WIPP’s platform advocates for modernized credit scoring that would level the playing field for women business owners.

Until Dodd-Frank is fully implemented, its complete impact will remain unclear. WIPP continues to review ongoing regulations as well as work with Congress to scale back unnecessary barriers to capital access for women entrepreneurs.