MasterCard’s Settlement In Heartland Payments Breach Has CU Holdouts

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PURCHASE, N.Y. – MasterCard said yesterday that it received enough support from card issuers to proceed with a $41.4 million settlement in the Heartland Payments Systems breach, but dozens of credit unions and banks are still holding out as part of a class action lawsuit filed against Heartland.

“That’s just pennies on the dollar,” said Michael Caddell, a Houston lawyer representing the credit unions and banks in the case. He cited Suncoast Schools FCU, one of the credit union plaintiffs he said spent more than $1 million to cover fraud losses, card replacements and member notification in the Heartland case, but stood to gain just $45,000 from MasterCard.

“The deal has been solicited by Heartland,” Caddell told Credit Union Journal yesterday. “They went to MasterCard and Visa and they were buying liability coverage at a discount.”

He estimated the average settlement was between five cents and 25 cents on the dollar, with many card issuers settling for as little as five cents.

Among the other credit unions suing for a bigger payout are Pennsylvania State Employees CU, Alabama Rural Electric FCU, GECU, Matadors Community CU, Community West CU, First Castle FCU, Gulf Winds FCU, MIDFLORIDA FCU and PBC CU.

Under the MasterCard settlement, participating card issuers must agree to accept a pro rata payment and agree to forfeit any potential litigation claims.

Earlier Visa agreed to pay hundreds of affected card issuers $60 million to settle potential claims against it in the case, believed to be the largest cards breach ever which exposed more than 100 million accounts to hackers. Both the Visa and MasterCard payouts are being funded by Heartland.

MasterCard announced a 99% acceptance rate for the settlement yesterday. But Caddell, as he did in the Visa settlement, questioned what the 99% was of: was it of the total number of affected card issuers? the total number of cards issued? the total amount of claimants? or the total number of affected accounts? “I don’t know that it means a whole lot,” he said of the 99% figure.

Heartland representatives did not return phone calls seeking comment yesterday.

MasterCard representatives referred to yesterday’s statement regarding the settlement.

The Heartland case is closely related to breaches at TJX Cos. and several other major retailers, Barnes & Noble, Sports Authority, Hannaford Bros., OfficeMax, Boston Market, DSW, BJ Wholesale Club, which, it turned out, were all perpetrated by the same hacker, Albert Gonzalez, a one-time government informant, and his accomplices. The group sold credit card information over the Internet to individuals all over the world, who used it to create their own counterfeit cards, which were used to buy merchandise and withdraw cash from the hacked accounts.


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