Heartlands banks under fire
(25 January 2010 – USA) Five financial institutions have filed a class action lawsuit against two acquiring banks involved in the Heartland Payment Systems data breach, the largest data breach in history, claiming they also share responsibility for the damages.
Heartland executives first learned of the security breach in October 2008, when credit card companies Visa and MasterCard alerted them to suspicious activity in processing card transactions. After an initial investigation, Heartland announced that it had been the victim of a data breach finding malicious software in its payment processing system.
Last month, Heartland agreed to a settlement with Visa to pay US$60 million (A$66 million) to the issuers of Visa-branded credit and debit cards affected by the breach.
Lawyers involved in the deal have warned, the issuers of the cards, that the proposed settlement is not as generous as Heartland and Visa want them to believe and that the two acquiring banks Heartland Bank and KeyBank are just as responsible for the damages.
According to interim co-lead counsel, Mike Caddell of Caddell & Chapman, there were over 86 million VISA payment cards compromised by the data breach. Once a financial institution factors in the costs it incurred to cancel and reissue the payment cards and the unauthorised charges it was forced to absorb, its share of the settlement most likely will be ‘pennies on the dollar’, Mr Caddell added.
Co-lead counsel, Richard Coffman of Coffman Law Firm, one of the other law firms representing the banks, said that the majority of the settlement funds are provided by Heartland, which is downplaying its ability to pay any more money. Yet, KeyBank has US$97 billion of assets and Heartland Bank has over US$1 billion of assets, which suggests that there are additional sources of money to compensate the issuers for their damages.
Last month, Heartland agreed to a settlement with Visa to pay US$60 million (A$66 million) to the issuers of Visa-branded credit and debit cards affected by the breach.
Lawyers involved in the deal have warned, the issuers of the cards, that the proposed settlement is not as generous as Heartland and Visa want them to believe and that the two acquiring banks Heartland Bank and KeyBank are just as responsible for the damages.
According to interim co-lead counsel, Mike Caddell of Caddell & Chapman, there were over 86 million VISA payment cards compromised by the data breach. Once a financial institution factors in the costs it incurred to cancel and reissue the payment cards and the unauthorised charges it was forced to absorb, its share of the settlement most likely will be ‘pennies on the dollar’, Mr Caddell added.
Co-lead counsel, Richard Coffman of Coffman Law Firm, one of the other law firms representing the banks, said that the majority of the settlement funds are provided by Heartland, which is downplaying its ability to pay any more money. Yet, KeyBank has US$97 billion of assets and Heartland Bank has over US$1 billion of assets, which suggests that there are additional sources of money to compensate the issuers for their damages.
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