Evan Schuman's StorefrontBacktalk

Shortly after Heartland tried to sweep away most of the lawsuits against it with a series of recent negotiated settlements, a group of banks is trying to persuade other banks to reject the settlement offer and support a class-action lawsuit instead.

The lawsuit, filed Tuesday (Jan. 19), hit Heartland hard for its “lack of Payment Card processing system security; its desire to use a ‘lowest bidder’ system of selecting its outsourced IT ‘auditors’; its reliance on a ’snapshot’ telling it that, at one identifiable point in time, its system supposedly complied with the bare minimum industry standards; its startlingly poor IT oversight in general; and (Heartland’s) complete and utter disregard of the oversight responsibilities they had to their fellow members of the Associations that allowed the intruders to make trip after trip in and out of the Heartland Payment Card processing system.”

The lawsuit also referenced Heartland’s initial response to the attack. “Thirteen months later, the ‘clean up’ efforts would be
seen for what they were—worthless.” (Pause. But other than that, Mrs. Lincoln, how was the play?)

Lawyers behind the new class-action attempt are painting the settlement as inadequate and implying that it lets Heartland and some Heartland partners off too easily. “There were more than 86 million Visa payment cards compromised by the data breach,” said Attorney Mike Caddell. “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.”

But the attorneys saved some of their most direct comments for Heartland’s bank partners. “Perhaps the most egregious aspect of the proposed settlement is that Heartland’s acquiring banks—KeyBank and Heartland Bank—which also are potentially liable for the data breach damages, will receive a complete release of any liability even though they are contributing little, if anything, to the settlement,” said Interim Co-lead Counsel Richard Coffman. “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.”

Coffman pushed this point a bit further and started to question Visa’s agenda.