Legal, Regulatory, and Privacy Issues

Texas law lets merchants ask cardholders to show ID


A new Texas law lets merchants ask a customer paying with a credit or debit card for a government-issued photo ID to prove his or her identity.

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If you’re one of the millions of Texans who make point-of-sale purchases with a credit or debit card, you soon might be asked to show your photo ID.

A state law that took effect Jan. 1, 2018, enables Texas merchants, including big-box stores and restaurants, to request that a customer paying with a credit or debit card produce a government-issued photo ID to prove his or her identity.

However, the law doesn’t make it mandatory. In other words, a customer can decline to show a photo ID and put a purchase on a credit or debit card without any repercussions. Likewise, the merchant won’t be penalized if a cardholder doesn’t display a photo ID during a point-of-sale transaction.

The Texas law, which will expire in 2023, represents a compromise. Supporters initially had wanted the photo ID measure to be mandatory, but opponents balked. So instead of a mandate being pushed through, both sides agreed to make the request for a cardholder’s photo ID an option for merchants.

The law doesn’t affect transactions made via mobile wallet. 

“Our position was that if you make it mandatory, it’s going to significantly change the dining experience for customers.”

Opponents say requiring photo ID would slow payments

Kenneth Besserman, general counsel for the Texas Restaurant Association, says his group objected to the prospect of a photo ID mandate because it would have slowed down the payment process at eateries ranging from fine dining spots to fast-food places.

“Our position was that if you make it mandatory, it’s going to significantly change the dining experience for customers,” Besserman says.

Additionally, he says, the mandate could have caused Texas restaurants and other merchants to violate their agreements with card-processing companies. The two biggest card networks – Mastercard and Visa – let a merchant ask for a photo ID from a card-using customer, but the merchant is unable to reject a transaction if the customer can’t or won’t show an ID.

Moreover, Besserman says, a photo ID mandate wouldn’t have made much of a difference in combating fraud at restaurants, since most credit and debit card fraud at those establishments involves relatively small dollar amounts. That’s opposed to larger-scale transactions, such as purchases of big-screen TVs, that are carried out by fraudsters at traditional retailers, he says.

Like the Texas Restaurant Association, the Texas Retailers Association opposed the photo ID mandate but did not fight the more relaxed photo ID option.

Jim Sheer, vice president of government and regulatory affairs for the Texas Retailers Association, says he thinks retailers will adopt one of two stances toward the photo ID option: request IDs for all card transactions or not request them for any card transactions. He suspects larger retailers will tend to go the not-check-the-ID route and smaller retailers will lean toward the check-the-ID option.

Sheer says his group had opposed the mandate because it would have forced retailers to perform an ID check without firm standards in place for accepting or declining a questionable transaction.  

Supporters say photo ID mandate would fight card fraud

The Independent Bankers Association of Texas was the main proponent of the photo ID mandate.

While the mandate did not become law, the state-endorsed ability of a merchant to request a photo ID for a point-of-sale purchase and potentially deny a transaction will help battle some card fraud – primarily when a card has been lost or stolen – and will result in fewer financial losses for consumers, merchants and banks, the association says.

Over the years, the bankers association has tried various approaches to help its members minimize point-of-sale fraud, namely transactions involving debit cards, says Steve Scurlock, executive vice president of the Independent Bankers Association of Texas. The new law won’t fix the problem, he says, but it will “provide just one more tool to hopefully quell some of the debit card fraud that goes on.”

Scurlock says there’s some question as to whether the law will trump Mastercard’s and Visa’s agreements with merchants when it comes to denying a transaction made by a cardholder who fails to produce a photo ID. However, he doubts the Mastercard and Visa agreements will take precedence.

The Texas law “is a totally voluntary protocol for the merchant. We’re hopeful things will move forward,” Scurlock says.  

“The goal is to get technology to take cards out of the hands of anybody who doesn’t own the card in order to limit the amount of fraud.”

Opposition from card networks

Both Mastercard and Visa had opposed the photo ID measure.

At an April 2017 legislative hearing, Visa lobbyist Keith Strama said the photo ID measure goes in the “opposite direction” of current anti-fraud efforts in the credit and debit card industry.

“The goal is to get technology to take cards out of the hands of anybody who doesn’t own the card in order to limit the amount of fraud,” Strama said. “We’re trying to get to the point where you stick [a card] in a machine; you don’t hand it to the clerk.”  

New technologies to fight card fraud

Noting that the photo ID law expires in September 2023, Scurlock says he hopes anti-fraud technology such as biometrics and EMV chip cards will keep evolving during the more than five-year span that the law is in effect.

The law “is well below the panacea threshold, and we recognize that,” Scurlock says. “But we \u2026 are hopeful that it will slow some of the lost-and-stolen-card issues we continue to see.”

See related: Mastercard, Discover, AmEx will ditch signatures, Infographic: Higher fraud numbers can mislead, Merchants say mobile wallets are coming but won’t fight fraudSuspect card fraud? How to file a claim

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