Heartland, MasterCard Settle

Agree to $41.4 million settlement over payment system intrusion

Published in CSP Daily News

PRINCETON, N.J. -- Heartland Payment Systems has entered into a settlement agreement with MasterCard Worldwide to resolve claims from MasterCard and its issuers related to the 2008 criminal intrusion into Heartland's payment system environment. Under the agreement, alternative recovery offers totaling $41.4 million will be made to eligible MasterCard issuers with respect to losses alleged to have been incurred by them as a result of the criminal intrusion, and MasterCard will recommend that eligible MasterCard issuers accept such offers.

Under the terms of the settlement, [image-nocss] MasterCard card issuers that filed timely claims for reimbursement of operational expenses or to recover fraud losses on certain accounts processed by Heartland during 2008 will be eligible to receive a specified dollar payment with receipt expected during the third calendar quarter of 2010, if they choose to accept their offers.

The settlement is contingent upon, among other things, MasterCard card issuing financial institutions representing at least 80% of the claimed-on MasterCard accounts having accepted their offers by June 25, 2010.

Issuers that choose to accept their offers must agree to forgo any other remedies or recoveries they might otherwise be able to obtain from Heartland and its acquirers by reason of the Heartland data security breach, and to release MasterCard, Heartland and Heartland's acquirers from all legal and financial liability associated with the breach.

Issuers that elect not to accept their offers will have their claims determined pursuant to MasterCard's internal processes. They may receive more or less than the amounts they were offered, or nothing at all, depending on various factors, including MasterCard's determinations of their claims and the outcome of any litigation that Heartland may file, and has threatened to file, to challenge claim awards that exceed certain amounts.

The settlement is contingent upon financial institutions representing 80% of the claimed-on MasterCard accounts accepting their alternative recovery offers by June 25, 2010. The settlement also includes mutual releases between Heartland and its sponsoring bank acquirers on the one handand MasterCard and the accepting issuers on the other.

All eligible issuers will soon receive notification from MasterCard with full details of the settlement agreement and how to accept their alternative recovery offers before the offers expire.

"We are pleased to have reached an equitable settlement agreement that helps issuers of MasterCard-branded cards obtain a recovery with respect to losses they may have incurred from the intrusion. We look forward to working with MasterCard to encourage these issuers to participate in the settlement program for a speedy resolution," said Bob Carr, Heartland's chairman and CEO.

"We feel that this settlement represents an appropriate and fair resolution for our issuing financial institution customers and will enable them to avoid uncertainties and delays associated with potentially protracted litigation," said Wendy Murdock, chief franchise officer for MasterCard Worldwide. "The agreement underscores MasterCard's continuing efforts to maintain the integrity of payment card industry standards and mitigate the impact of account data compromise events."

As a franchisor and processor, Purchas, N.Y.-based MasterCard Worldwide develops and markets payment solutions and processes approximately 22 billion transactions each year. Powered by the MasterCard Worldwide Network and through its family of brands, including MasterCard, Maestro and Cirrus, MasterCard serves consumers and businesses in more than 210 countries and territories.

Princeton, N.J.-based Heartland Payment Systems, the fifth largest payments processor in the United States, delivers credit/debit/prepaid card processing, gift marketing, payroll, check management and related business solutions to more than 250,000 business locations nationwide. Heartland is the founding Heartland and MasterCard Worldwide agree on settlement/supporter of The Merchant Bill of Rights, a public advocacy initiative that educates merchants about fair credit and debit card processing practices.