97% Of Visa Issuers Accept Heartland Settlement Offers

More than 97% of Visa credit and debit card issuers have accepted last month’s offer from Visa Inc., Heartland Payments Systems Inc. and Heartland’s acquirers to settle claims related to the payment processor’s 2008 network data breach, according to the companies.

Under the Jan. 8 settlement agreement, Heartland will pay up to $60 million to issuers of Visa cards for expenses caused by the breach (see story). 

Heartland disclosed the breach in January of last year (see story).  Albert Gonzalez of Miami in December pleaded guilty to charges he breached Heartland’s network and those of Hannaford Bros. Co., 7-Eleven Inc. and two unnamed retailers (see story). 

The high level of acceptance of the settlement offer among Visa issuers surpasses the minimum requirement of 80% for the offer to be effective, according to the agreement. Issuers participating in the settlement must release their legal claims against Heartland, its sponsoring banks and Visa, the agreement states.

Visa, Heartland and Heartland’s acquirers have agreed to renew the settlement offer to issuers who have not yet accepted it until Feb. 8. The original deadline was Jan. 29.

Visa will be notifying participating issuers with details about the payment process. Issuers will receive settlement payment by Feb. 25, according to the agreement.

“Visa is pleased to bring this issue to a close for so many financial institutions,” Ellen Richey, Visa chief enterprise risk offer, said in a statement.

Three law firms representing issuers of Visa cards had claimed the settlement “has many weaknesses” (see story). The three firms, each with interim co-lead counsels representing card issuers, noted in a joint press release last month the proposal may provide little compensation for issuers because they could recover only “pennies on the dollar” for their breach-related costs.

The high rate of acceptance, however, indicates “most of what we heard was typical lawyer talk,” says Adil Moussa, an analyst with Boston-based Aite Group LLC.

“The two or three most-important figures we need to look at is how much did the issuers really spend to counter any activity,” says Moussa. “I don’t believe that they have been astronomical.”

Moussa anticipates similarly smooth settlements with Heartland and Discover Financial Services and MasterCard Worldwide. “Heartland has been pretty upfront about what they are going to do, and they’ve been pretty fair,” he says.

Heartland settled with American Express Co. for $3.6 million in December (see story). Also in December, Heartland reached a $2.4 million settlement agreement with cardholders (see story). 

The Heartland settlement is the largest publicly known settlement involving Visa issuers. The TJX Cos. in 2007 agreed to pay up to $40.9 million to Visa issuers for their costs related to a 2007 breach of the company’s network.

A Heartland spokesperson declined to provide additional comments.