Target (NYSE:TGT) and Visa (NYSE:V) has inked a deal where the former will pay the card issuers a maximum of $67 million for settling the 2013 data breach. This criminal activity affected about 40 million cardholders. This agreement was stuck by Target with Visa on behalf of firms and banks which issue debit and credit cards. This deal is done at a time the merchants and card industry are making progress towards the adoption of more secure cards. These new cards will hopefully stop such attacks.
Record Breaking Settlement
According to Target, it is also trying to make a similar deal with MasterCard Inc. (NYSE:MA) for the latter's card issuers. The sheer size of these two settlements could surpass the 2010 agreement when Heartland Payment Systems (NYSE:HPY) consented to pay in excess of $100 million to MasterCard and Visa for the big 2008 breach.
The Minneapolis headquartered Target breach is ranked among the notable data related incidents to hit retailers during the last few years. The retailer was not the last. It was followed by a number of alike breaches directed towards recognized merchants like Neiman Marcus Group Limited (the luxury retailer), Home Depot Inc. (NYSE:HD) and Asian restaurants like China Bistro owned by PF Chang.
According to Target, it was happy to ink such an agreement and its associated costs are already reflected in the previous financial results of the company. Unlike the previous tentative settlement made with MasterCard, which was considered unacceptable by card issuers, this Visa deal has already found acceptance among the important Visa issuers.
The retailer has already inked a $10 million settlement with its customers as per federal class action suit. However, as about 40 million customers had suffered due to their card information stolen, a majority of customers will only receive a few dollars. Those customers who have documentation of bigger unreimbursed losses could get reimbursement up to $10,000.
The exact fraud amount remains unknown. Trade groups which represent credit unions and community banks estimated that they have spent in excess of $350 million in reissuing the debit and credit cards damaged in the breach. There were also a host of other issues to set right. The Home Depot hack after the Target breach also took its toll.
Visa has reiterated that this agreement is an excellent attempt to put such an event behind both the companies and it now focuses towards more secure payments.