Attorneys representing issuers of Visa payment cards in a class-action lawsuit against Heartland Payment Systems Inc. say that the proposed $60 million settlement between Heartland and Visa Inc. is insufficient.
In a statement issued Wednesday, Mike Caddell and Richard Coffman argued that the proposed settlement to compensate financial institutions affected by the Heartland data security breach, announced earlier this month, is paltry.
"There were over 86 million Visa payment cards compromised by the data breach," Caddell of Houston-based Caddell & Chapman said in a prepared statement. "Once a financial institution factors in the costs it incurred to cancel and reissue the payment cards and the unauthorized charges it was forced to absorb, its share of the settlement most likely will be pennies on the dollar."
A year ago, Princeton, N.J.-based Heartland disclosed that its payment processing system was hacked; an estimated 130 million credit and debit cards were stolen, forcing banks and credit unions to issue new cards.
The lawyers claim that the proposed Visa settlement gives eligible Visa issuers little time -- 15 days -- to decide whether to participate. The proposal is contingent on acceptance by financial institutions representing 80% of the eligible issuers' U.S. accounts.
In addition, they say the proposal would release potentially liable parties -- namely Heartland's acquiring banks, KeyBank and Heartland Bank - which would contribute little to the settlement. The lawyers filed a complaint earlier this week against KeyBank and Heartland Bank in Houston federal court, claiming they share responsibility for damages from the breach.
"The majority of the settlement funds are provided by Heartland, which is downplaying its ability to pay any more money. Yet, KeyBank has $97 billion of assets and Heartland Bank has over $1 billion of assets, which suggests that there are additional sources of money to compensate the issuers for their damages," said Coffman of Beaumont, Texas-based The Coffman Law Firm.
Heartland did not immediately respond to a request for comment on the claims made by Caddell and Coffman. Visa declined to comment.