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News Now

CU System
Some CUs walking away from VisaHeartland settlement
HOUSTON (2/9/10)--More than 50 credit unions that walked away from a $60 million settlement offered by Heartland Payment Systems to Visa card issuers for the losses they incurred during a massive data breach are pursuing additional litigation. The litigation is in its early stages, Michael Caddell, a Houston attorney representing the credit unions, told News Now. There is a motion to dismiss the case that is pending, but Caddell said he expects the motion to be unsuccessful and the lawsuit to go forward. “We feel good about it,” Caddell said. The credit unions involved in the litigation rejected Heartland’s $60 million settlement because they would be receiving “a few pennies on the dollar,” for their losses, Caddell said. The institutions account for a few million of Visa accounts affected by the breach--which represent more than $100 million in losses, Caddell estimated. The Heartland Payment Systems data breach cost financial institutions up to thousands of dollars for affected accounts because of fraud charges and card replacements. Some of Caddell’s clients were offered less than 10 cents on the dollar, and some were offered less than one cent on the dollar. Though some are choosing not to accept the settlement, Caddell said he is not surprised that many institutions did accept the deal. Many feel their relationship with Visa is important. “Some of my clients are concerned about crossing Visa,” Caddell said. Another reason the settlement may have been accepted is because about 20 of the largest institutions involved own the vast majority of affected accounts. Heartland negotiated directly with the largest accounts, he said. “Once you take them out, you overcome the 80% benchmark [for the settlement],” Caddell said. About 97% of the affected institutions accepted the settlement, which was announced last week. Last Thursday, Visa extended the deadline institutions had to accept the offer. The deadline was artificial to begin with, because nothing in the marketplace required rapid action, Caddell said. “Why didn’t they give them more time?” he asked. “They wanted to rush people into the deal.” Caddell said he expects that another 50 million MasterCard accounts may be involved with a future settlement. As they did before, “Heartland may try to buy them off for a few pennies on the dollar,” he said. Heartland also has settled with American Express card issuers. MasterCard has not settled with Heartland.
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