Customers: bring cash! Without photo identification, you might need it.
Starting January 1, 2018, a new state law will allow Texas business owners to verify customers’ photo identification in order to authorize a credit card purchase; failure to present ID may result in the purchase being declined. Currently, merchants have no explicit recourse to decline a purchase if a customer refuses to produce identification upon request.
The new law aims to crack down on identity theft and fraud—issues that cost banks, businesses, and buyers billions of dollars. In 2015, these crimes affected 5.3% of American consumers, according to a study by Javelin Strategy & Research. By 2016, that percentage rose to the highest on record, affecting 6.15% of United States citizens.
The new legislation was authored by State Sen. Bryan Hughes (R-Mineola) and passed during a regular session that ended in May.
“I think most people, like me, were surprised that merchants cannot already do this,” said Hughes. “The intent of the law is to give Texas businesses the right to take this common sense step of asking for an ID for a credit card transaction,” as crimes of this type become more frequent.
Lawmakers also hope this can alleviate pressure that banks receive due to fraud.
“We end up taking a lot of losses,” said Kevin Monk, executive vice president and chief operations officer at Alliance Bank, based in Sulphur Springs. “One card breach can have a significant impact.”
While the law should prevent fraud crimes, some foresee weaknesses or issues that the legislation will not address.
“There’s going to be some issues as far as what if the customer comes in and pays after they eat and then they tell me they don’t have an ID,” said Debbie Rodriguez, owner of Casa Rodriguez Mexican Restaurant in Bryan, Texas. “Then what? I mean I have to get my money, so I have to accept their credit card.”
In addition, the law does not definitively state that merchants must not accept a credit card from someone without ID. The legislation only says, “may not accept,” which leaves a gray area where business owners could use discretion.
For this reason, existing agreements and contracts that businesses have with credit card companies could cancel out the regulations that lawmakers are trying to establish, critics say.
“I don’t think [the new law] will stop a significant amount of fraud,” Monk said. However, he continued, “I think anything we can do will help.”