Discover Financial Services has agreed to pay more than $1.2 billion to resolve a class action lawsuit alleging that it systematically misclassified certain consumer credit cards as commercial cards, causing merchants to pay inflated interchange fees over a period spanning more than 16 years [1]. The settlement class covers end merchants, merchant acquirers, and payment intermediaries that processed transactions on the misclassified cards between Jan. 1, 2007, and Dec. 31, 2023 [1].
The core theory of liability centers on interchange fee structures, the per-transaction fees that card networks and issuers set and that merchants pay when customers use credit cards. Commercial cards typically carry higher interchange rates than consumer cards, on the premise that business customers generate greater transaction value. Plaintiffs alleged that Discover routed consumer accounts through commercial card classifications, systematically extracting higher fees from merchants who had no contractual basis to challenge the designation or seek a refund through ordinary business channels [1]. The misclassification claim, sustained over the full 17-year class period, forms the factual core of the settlement's scope.
The settlement was disclosed in connection with a May 2026 claims period, with eligible class members, including direct merchants and the acquirers and processors that stood between them and Discover, able to submit claims to participate in the fund [1]. The breadth of the class, reaching both end-point merchants and the intermediary layer of the payments ecosystem, reflects the structural complexity of interchange litigation, where the same transaction can generate fee exposure at multiple tiers of the processing chain.
The $1.2 billion figure places this resolution among the larger class action settlements in the consumer financial services sector. It follows a broader pattern of interchange-related litigation that has produced major settlements against Visa and Mastercard over the past two decades, though Discover's network operates under a distinct model and the misclassification theory is specific to how Discover categorized its own card portfolio. Whether the settlement has received preliminary court approval or remains subject to a fairness hearing was not confirmed in available source materials at publication.
Eligible merchants and processors should monitor the claims deadline. The resolution does not appear, on available facts, to include any admission of liability by Discover.
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