Target Corporation (NYSE:TGT) is about to reach an agreement with MasterCard for reimbursing financial institutions for around US$ 20 million they had earlier incurred from a massive data breach of the retailer in 2013.
The deal is likely to get announced this week after several negotiations. The US$ 20 million covers costs which banks had incurred for reissuing credit/debit cards is after the negotiations took place. It is a result of the fraud that occurred due to customer information exposure.
Not to mention, the payout would be roughly the same as TJX Cos. paid to MasterCard issuers in 2008 for a data breach that exposed more than 100 million cards to fraud. TJX is the parent of discount retailer TJ Maxx and other chain stores.
The settlement underscores the ongoing financial costs that are associated with a wave of data breaches that have exposed hundreds of millions of Americans to fraud over the past few years. Target disclosed in a recent financial filing that it has incurred US$252 million of breach-related expenses.
The breach also set off a frenzy among card-issuing financial institutions, as they scrambled to send new cards to customers. Some took the unusual step of reissuing cards en masse, even if no fraudulent activity had been detected.
MasterCard, which has been negotiating with Target on behalf of the card-issuing financial institutions, will distribute the reimbursed funds to the firms that issue credit cards and debit cards under its brand.
According to the Nilson Report, a Carpinteria, Calif.-based industry newsletter, Citigroup Inc. is the largest MasterCard issuer, with 46 million credit cards. The negotiations have been particularly difficult because the Target breach was followed by a wave of other high- profile breaches, including one at Home Depot Corp. that was even larger.
