Discover Financial Settlement Now Subject to Court Approval.
On July 1, 2024, Discover Financial entered into an agreement to settle class action lawsuits from merchants regarding a card product misclassification which caused merchants to pay higher fees. The company has set aside $1.2 billion to cover payments due under the settlement. The agreement is subject to court approval.
In July 2023, Discover disclosed that beginning in mid-2007, it incorrectly classified certain credit card accounts into its highest merchant and merchant acquirer pricing tier. The company finished fixing the misclassification in November 2023. Cardholders were not affected by the misclassification.
In its March 2024 10Q filing, Discover disclosed that it was cooperating with a Securities and Exchange Commission (SEC) investigation into the card product misclassification matter. The company expects the investigation will likely result in enforcement actions, which may include monetary penalties and other remedies.
In addition to the merchant lawsuits, Discover and its subsidiaries have been named as defendants in various lawsuits as a result of the misclassification, including a putative class action on behalf of shareholders.
For more information, see this article from Banking Dive.
