On May 19, MasterCard Inc. (MA) announced that it has reached a settlement with Heartland Payment System, whereby all disputes regarding breach of data security has been settled between both the parties along with the MasterCard’s card issuers. Consequently, the settlement called for a $41.4 million payment by Heartland to the eligible MasterCard’s card issuers who were victims of the operational costs and fraud losses during 2008.
The matter took shape when some hackers installed spying software on Heartland’s computer network in 2008, which provided access to the data on the systems that process Visa Inc. (V), MasterCard, American Express Co. (AXP) and Discover Card of Discover Financial Services (DFS) transactions. Hence, the current settlement is made to cover the loss claims of MasterCard issuers.
Accordingly, the card issuers who filed their claims on time will be eligible to receive a particular payment with receipt by the third quarter of 2010. However, for the settlement to take place, at least 80% of MasterCard issuers who filed claims must accept the deal by Jun 25, 2010. Besides, the settlement includes another condition for the card issuers stating that following this payment such issuers must abstain from claiming any remedy associated with this incident in the future.
The condition has been laid in an attempt to permanently release Heartland of all the legal and financial liabilities. In turn, the settlement also accentuates MasterCard’s continued emphasis on delivering a transparent and risk-free payment service to its customers. This is also significant for maintaining the integrity of payment card industry standards and mitigating the negative impact of account data fraud events.
MasterCard is the second leading organization in the payment industry benefiting from strong secular demand growth, meaningful international exposure, high barriers, excellent pricing power and impressive operating leverage. We believe such instances are only eye-openers for the firms in order to alert their security checks from time to time.
Read the full analyst report on “MA”
Read the full analyst report on “V”
Read the full analyst report on “AXP”
Read the full analyst report on “DFS”
Zacks Investment Research
