Target's $19 million proposed settlement with MasterCard failed to receive the required 90% participation rate from issuers, meaning the settlement will not happen, according to an announcement from MasterCard and one of the attorneys representing five card issuers fighting the settlement.
In its April 15 announcement of the settlement, Target noted the money would only be paid out if at least 90% of eligible issuers accepted the offer by May 20, 2015. The proposed settlement was in response to a data breach in late 2013 involving millions of credit and debit cards, as well as personal information of Target customers.
But according to communications sent Thursday from MasterCard to a major financial services provider and obtained by CU Times, that threshold wasn't met. The exact percentage was not disclosed.
"I know this will likely be a sobering event for other card companies," said Karl Cambronne of Chestnut Cambronne, who is one of the attorneys representing Umpqua Bank, Mutual Bank, Village Bank, CSE FCU and First Federal Savings of Lorain, which are fighting the settlement. "I also think it will be an encouraging event for banks, who are finally saying to these sorts of paltry settlements, 'We're not going to do this anymore. We're not going to put up with this anymore.'"
Last month, Cambronne and attorney Charles Zimmerman of Zimmerman Reed asked a judge to stop the settlement, arguing that proposed $19 million was far below issuers' actual damages, and that the settlement was improperly calculated, was negotiated without consulting the issuers, could pressure issuers to accept the offer for fear of losing the ability to issue MasterCard products, and unfairly required issuers to forfeit certain rights to sue under Minnesota's Plastic Card Security Act. The injunction request was denied.
It's too early to tell whether Target and MasterCard will attempt to renegotiate the settlement or offer a higher number, Cambronne added. "They may decide that they're not going to walk this path again. What, are they going to sweeten their offer by 5% and say it's good?" he said. Class-certification for the issuers is also not out of the question at this point, he said.
The event will likely affect how other card companies negotiate future data-breach settlements and may embolden issuers to hold out for higher settlement offers, he added. "The losses were just too huge here for banks to want to do this," he said.
The parties involved in the case will talk tomorrow and are scheduled to appear in court on Wednesday to determine what happens next, Cambronne said.
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