December 2013 Data Breach: Target and MasterCard Settle Lawsuit

On Wednesday, Target announced that it has settled a lawsuit against MasterCard involved in December 2013 data breach. Target has agreed to pay $19 million in order to settle the lawsuits.

MasterCard Inc. said that the money will be used by banks and credit unions for operating costs and fraud-related losses on cards that were affected in the incident. It shall however, be noted that the settlement will only take place if at least 90% of eligible accounts are ready for the offer and that too by May 20.

The breach has proved taxing, as it not only had cost the company’s CEO his job, but Target has not been able to overcome ever since. It is considered that in the breach, around 70 million customers were affected and also, potentially 40 million credit cards.

The estimated cost of the settlement has been reflected in the data breach liabilities that were established by Target in fiscal 2013 and 2014. The cost of the breach is at $162 million. As per Target, in the fourth and full year-2014 earnings, the incident had cost the company $162 million over the two years.

In the last quarter of 2013, Target witnessed $61 million in expenses with regard to the breach, but it has only claimed a loss of $17 million. It is because the $44 million were offset by insurance receivables. Next year was also not fruitful for the company as much more money was lost at that time.

In 2014, a total of $191 million was spent, but it came down to $145 million due to $46 million insurance receivable. In a class action lawsuit, Target agreed to pay $10 million. Target is also negotiating a similar settlement with another credit card company, Visa.