T-Mobile will shell out $500 million to settle the customer data breach that landed it a class-action lawsuit. The data compromise involved 76.6 million US users.
$350 million will be shared between the customers filing a claim and the lawyers handling the case. The balance will be committed to improving data security between 2022 and 2023, on top of whatever the company has already budgeted.
T-Mobile reported a breach last August after reports surfaced that the data of more than 100 million of its customers, including Social Security numbers, names, addresses, and driver’s licenses, was available for sale online. However, the number of victims was overstated, although the actual figure grew by the month. It was the fifth breach in four years.
A judge must approve the settlement as it is still a proposal, and T-Mobile will have ten days to provide the money for the payment. The settlement is potentially applicable to all 76.6 million US clients whose information was compromised. However, there are caveats for some of T-Mobile’s employees and customers that are close to the presiding judge.
Just how much a claimant gets has not been settled yet. That will have to wait until the number of claimants has been ascertained.
In the lawsuit, the plaintiff alleged that T-Mobile failed in its duty to protect the data of its past, present, and future clients. They also claimed T-Mobile did not properly inform the affected clients of the breach and failed to implement adequate data security.
T-Mobile denies the claims and states in the settlement agreement that the payout does not mean it accepts it is guilty. In fact, in its filing with the Securities and Exchange Commission, T-Mobile stated it reserved the right to terminate the agreement under some conditions, but it expects to settle the claims.
Meanwhile, in reaction to the massive data breach, the FCC has introduced proposed rules that will improve how companies like T-Mobile inform their clients of data breaches.
The settlement reads in part: “T-Mobile agrees to make a non-reversionary settlement payment of three hundred fifty million United States Dollars ($350,000,000) and deposit that settlement payment into the Settlement Fund as follows: (i) within ten (10) Business Days of the Court entering a Preliminary Approval Order, T-Mobile shall pay thirty-five million United States Dollars ($35,000,000) into the Settlement Fund to pay for Notice Costs and Administrative Costs; and (ii) within twenty (20) Business Days of the Effective Date of the Settlement, T-Mobile shall fund the remaining balance of the Settlement Fund (i.e., $315,000,000).
“The Settlement Fund shall be used to pay for (i) Notice Costs; (ii) Administrative Costs; (iii) Service Awards approved by the Court; (iv) Attorneys’ Fees and Expenses approved by the Court; and (v) Settlement benefits for the Settlement Classes as provided for in the Consumer Settlement Benefits Plan to be filed by Class Counsel and approved by the Court. Except as provided in Section 5.1, T-Mobile shall not be obligated to pay more than three hundred fifty million United States Dollars ($350,000,000) in connection with the Settlement of the Action, including with respect to all Notice Costs and Administrative Costs. No funds shall revert to T-Mobile with the sole exception that if the Effective Date does not occur or the Settlement is terminated in accordance with its terms, then T-Mobile shall be entitled to the amounts as set forth in Section 7.5.”