CHICAGO—An Illinois federal judge has granted final approval to a massive settlement under which Discover Financial Services will pay between $540 million and $1.2 billion to resolve class action claims alleging it improperly classified certain consumer credit cards as commercial accounts, resulting in merchants being charged excessive interchange fees for years, Law360 reported.
The litigation centered on allegations that beginning in 2007, Discover misclassified some consumer “rewards,” “premium,” and “premium plus” cards as commercial credit cards, pushing those transactions into higher-priced interchange categories and causing merchants, merchant acquirers and payment intermediaries to overpay fees through the end of 2023. Discover has denied wrongdoing but agreed to settle the claims to avoid continued litigation
The settlement follows years of mounting regulatory and legal scrutiny tied to the issue. In April 2025, the FDIC ordered Discover Bank to provide at least $1.225 billion in restitution to affected merchants and imposed a $150 million civil money penalty, while the Federal Reserve separately assessed a $100 million penalty against Discover Financial Services and DFS Services. Regulators said the misclassification problem lasted roughly 17 years and resulted in merchants being overcharged more than $1 billion in interchange fees.
The misclassification controversy has already triggered significant fallout for Discover, including shareholder litigation, regulatory investigations and leadership changes. The issue also surfaced during regulatory review of Capital One’s acquisition of Discover, with Capital One executives previously acknowledging the compliance problems could create substantial additional costs tied to remediation and enforcement actions, according to BankingDive.