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A $19 million proposed settlement between Target and MasterCard failed to go through because the deal did not receive 90 percent participation rate from MasterCard-issuing banks – a stipulation required by Target.

"Credit unions deserve to be fully compensated for their losses that were no fault of their own," said NAFCU Senior Vice President of Government Affairs and General Counsel Carrie Hunt. "The failure to opt in to the settlement by financial institutions sends a strong signal to card companies that the current reimbursement system does not work and financial institutions need to be made whole."

The settlement was contingent on, among other things, issuers representing at least 90 percent of the eligible MasterCard accounts accepting their alternative recovery offers, either directly or through their sponsoring issuers, by May 20. CU Times reported Thursday that it obtained communications sent Thursday from MasterCard to a financial services provider saying that the threshold was not met. The ABA Banking Journal also reported the deal has failed, as did Nasdaq.com, American Banker,ABCnews.com, StarTribune and other news publications.

Financial institutions' class counsel had protested that MasterCard's settlement with Target left their clients – three banks and one credit union – out of the negotiations, saying Target "was trying to hijack the class action and use MasterCard to foist a cheap deal on banks beholden to the credit card company," according to Reuters. Because the class had not been certified, however, Target's counsel said the negotiations were fair.

CU Times quoted Karl Cambronne of Chestnut Cambronne, who is one of the attorneys representing Umpqua Bank, Mutual Bank, Village Bank, CSE Federal Credit Union and First Federal Savings of Lorain, which are fighting the settlement, who said this news should be an "encouraging event for banks."

Cambronne told CU Times that the parties are scheduled to appear in court tomorrow to determine the next steps.