Banks Vote Down Target-Mastercard Settlement

Mastercard and Target concocted an agreement where Target would pay a fine of $19 million to settle all of the bank’s claims against Target as a result of the 2013-14 breach.  This would be separate from an agreement with Visa.  Mastercard was not able to get enough banks to agree to it,  so the lawsuits will continue against Target, who no doubt was hoping to put at least one lawsuit behind them.

As I wrote about before (see post), the deal was that in exchange for $19 million, the banks would drop their lawsuits against Target and Mastercard would dole out the money based on how many cards each bank had to reissue.  The banks had complained that this was not enough to cover their costs and had petitioned the judge to kill the deal (see post).  The judge said that he agreed, but was powerless to do anything about it.

The way the deal was constructed, if banks representing 90 percent of the cards that had to be reissued agreed to the deal, the deal was done.  If that  happened, the banks that objected could have pulled out of the deal, not shared in the $19 Mil and sued Target on their own.

Visa, which is separately trying to work a deal with Target, read the handwriting on the wall and agreed to up the per card payment to banks, with small banks now getting almost three times as much as they were getting (see post).

Well, today, Reuters is reporting that the deal fell apart and that the 90% requirement was not met (see article).  What this means is the banks which are party to this suit, who claim that they lost $160 million, evenly split between card reissue costs and fraud, will continue their lawsuit.  For Target, this means that either this will go to trial or they  will need to come up with more bucks to sweeten the pot.

Stay tuned.

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