Banco Master’s FinTech Will Financeira issued cards that used Mastercard’s network, and Will’s collapse left Mastercard on the hook to reimburse merchant acquirers that processed about 5 billion reais (about $997 million) of cardholder payments, according to the report.
Mastercard has paid about half that amount and is proposing that before it passes along more funds to those acquirers, it uses money collected from card customers to reimburse itself, the report said, citing unnamed sources who said they had seen a draft of a possible contract.
Mastercard did not immediately reply to PYMNTS’ request for comment.
According to the Bloomberg report, Brazil’s central bank adopted new rules that make payment networks responsible for ensuring payment of all transactions to the receiving user.
However, Mastercard told merchant acquirers that it should not be bound by those rules in the case of Will because the FinTech collapsed in January, and card firms had until May to adapt to the new rules, per the report.
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One of the Brazilian acquirers that received Mastercard’s draft for a possible contract, Cielo, told Bloomberg that merchant acquirers are not responsible for the payments.
“Acquirers could not, cannot, and will not be able to choose the issuers that are part of the payment scheme, nor are they responsible for the guarantees linked to the transactions,” Cielo said, per the report.
It was reported in November that Brazil’s central bank halted the operations of Banco Master and named a liquidator to handle creditor claims and sell assets. On the same day, police arrested the bank’s controlling shareholder.
Banco Master had struggled for months with liquidity pressures after growing rapidly by selling high-yield debt through investment platforms.
It was reported in January that Mastercard said it had suspended Will Bank cards from its network because the company had not complied with settlement schedules under its payments arrangement.
Brazil’s central bank ordered the liquidation of Will Financeira in January as it took measures to deal with illiquid institutions tied to Banco Master.
