Target and MasterCard reportedly broke their recently announced $19 million deal designed to compensate banks and credit unions severely affected by a 2013 data breach and prevent pending lawsuits.
The two companies said that the deal fell through because not enough affected financial institutions agreed on the terms of the settlement. This means that both Target and MasterCard will have to expect damages to be established by a court.
Yet, lawyers for the banks and credit unions said they were pleased with the current state of affairs because the $19 million deal would have covered just a part of their clients’ losses.
The deal was disclosed in April, when Target pledged to offer $19 million in compensation to the banks and credit unions that had issued MasterCards which were later compromised in the 2013 security breach. According to the retailer, more than 40 million customer accounts were affected by data leaks between November 27 and December 15, 2013.
Although, the incident cost Target millions of dollars worth of lost sales, the issuers of the compromised credit and debit cards were also affected. The $19 million were expected to cover for the operating costs and other losses caused byf the security breach.
However, the deal required 90 percent of the affected institutions to accept it. So, since MasterCard announced Friday that not enough affected parties agreed on the settlement, the agreement can no longer go into effect. The financial services company declined to disclose how many institutions did accept the deal. It only said that at that point, both companies were working to “resolve the matter.”
Target Corporation said that MasterCard had already briefed it on the current state of the deal, but declined to provide more details.
Attorneys from the institutions that had rejected the agreement said that Target was trying to settle looming lawsuits “for pennies-on-the-dollar.” So, they vowed not to stop until their clients would receive “proper compensation” for the losses.
Additionally, the National Association of Federal Credit Unions recently requested full compensation for its members.
On Dec. 19, 2013, America’s second-largest discount retailer announced that its credit and debit card network was affected by a major security breach. As a result, many customers avoided shopping at Target during that period because of security concerns. So, Target had massive losses in sales.
But the banks and credit unions that had issued the compromised Mastercards also recorded losses because they had to enhance the security of the credit and debit cards by adopting a microchip-based technology, which is considered to be more secure since is harder to duplicate.
Image Source: International Business Times