Target and MasterCard issued statements this morning regarding the failure of the companies' proposed $19 million settlement with issuers to reach the 90% participation threshold by their May 20 deadline.
The statements came after CU Times reported the news yesterday, and now what could be a long process begins regarding how to move forward.
Target reached out to CU Times this morning with the following statement.
"The April 16 settlement agreement between MasterCard International Incorporated and Target was to become effective if eligible issuers of at least 90% of all qualified accounts opted in to the settlement by May 20, 2015. MasterCard has informed Target that the 90% threshold was not reached by the May 20 deadline. Target has nothing further to share at this time," the retailer wrote.
MasterCard also issued a statement.
"On April 16, MasterCard provided issuers with the option of participating in an alternative recovery settlement with Target to resolve claims related to the retailer's 2013 data breach. This settlement was conditioned on eligible issuers representing at least 90% of the eligible MasterCard accounts accepting their alternative recovery offers by May 20, 2015. As of today, the 90% threshold has not been reached. Therefore, the settlement will not become effective. The alternative recovery offers were provided to issuers as a way to deliver to them certain and prompt payments for a portion of the costs they incurred as a result of the Target data breach, including card reissuance costs and fraud losses. At this stage, we will continue to work to resolve this matter," the card company wrote.
For Charles Zimmerman of Zimmerman Reed PLLP and Karl Cambronne of Chestnut Cambronne PA, who represent five financial institutions that fought the settlement, Target's inability to reach the 90% threshold was good news.
"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. Financial institutions clearly saw through Target's misleading statements and efforts to extinguish pending legal claims for pennies-on-the-dollar," they said in a statement. "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," the attorneys told CU Times.
NAFCU also lauded the demise of the settlement.
"Credit unions deserve to be fully compensated for their losses that were no fault of their own," NAFCU general counsel Carrie Hunt said. "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."
It's unclear at this point whether Target and MasterCard will attempt to renegotiate the settlement, Cambronne said yesterday, and class certification for issuers may not be out of the question. The next immediate step is a court hearing on Wednesday.
"Litigation does nothing to prevent future breaches," Hunt added. "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."
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