PURCHASE, N.Y.—MasterCard reports that it has failed to reach a settlement with Target Corp over claims related to the 2013 data breach at the retailer due to a key condition not being met.
The proposed $19-million settlement has been voided after the pact failed to attract enough support from FIs, according to published reports.
As part of the proposed out-of-court agreement, at least 90% of financial institutions affected by the breach had to approve the settlement by Wednesday in order for it to take effect. But the Minneapolis-based retailer and MasterCard have both confirmed that threshold was not met by the deadline, reports indicated.
The Minneapolis Star Tribune indicated that the dispute now heads back to a federal lawsuit that is seeking class-action status and is making its way through U.S. District Court in St. Paul. But MasterCard suggested it may be looking at options.
“At this stage we will continue to work to resolve the matter,” MasterCard said in a statement.
The Star Tribune noted that MasterCard added that the alternative recovery offers were an effort to provide financial institutions with a more certain and prompt payment for a portion of the costs they incurred, such as for issuing new cards and fraud losses.
NAFCU President and CEO Dan Berger previously stated that the trade association was hoping for a larger settlement figure and not “pennies on the dollar.”
The lead plaintiffs’ attorneys argued, as well, that the settlement was not a good deal for financial institutions.
“We are pleased that financial institutions have resoundingly rejected Target and MasterCard’s attempt to avoid fully reimbursing the losses suffered during one of the largest data breaches in U.S. history,” attorneys Charles Zimmerman and Karl Cambronne said in a joint statement. “Financial institutions clearly saw through Target’s misleading statements and efforts to extinguish pending legal claims for pennies-on-the-dollar. We will continue working to hold Target accountable and ensure that all affected financial institutions receive proper compensation for losses resulting from this data breach.”
Earlier this month U.S. District Judge Paul Magnuson denied attempts by the plaintiffs’ attorneys to block the MasterCard settlement since the lawsuit had not yet been certified as a class action. But the judge did say he felt the terms of the settlement did not “appear altogether fair or reasonable.”
NAFCU Senior Vice President of Government Affairs and General Counsel Carrie Hunt emphasized that credit unions deserve to be fully compensated for their losses from the Target breach, which was no fault of their own.
“The failure to opt in to the settlement by financial institutions sends a strong signal to card companies that the current reimbursement system does not work and financial institutions need to be made whole," said Hunt in a release.
Hunt pointed out that litigation does nothing to prevent future breaches.
“That is why we continue to urge Congress to act to protect consumers’ financial information by enacting stronger standards and holding retailers and merchants directly accountable for their data breaches,” she said.
The court case is expected to go to trial in March 2016.