by Ben Dwyer Just days before its merger with CapitalOne received regulatory approval, Discover was fined by the Federal Reserve and FDIC for allegedly overcharging businesses.
A class action lawsuit was also filed, allowing business owners a path to attempt to recoup money they were overcharged. This article includes the official class action website for those who would like to stay on top of deadlines.
But first, let’s take a look at what actually happened.
What did Discover do?
According to the FDIC and Federal Reserve, Discover “misclassified” consumer credit cards, improperly classifying them as commercial cards. The agencies state that as many as 5 million cards were misclassified, with approximately 98% of cards classed as “commercial” actually consumer cards.
Since commercial cards typically incur higher interchange fees, this meant that businesses were charged higher fees than they should have been for millions of transactions. The agencies claim that this took place between 2007 and 2023, a staggering 17-year period, and that businesses were overcharged collectively by more than $1 billion.
Discover’s Fine
In addition to being ordered to return more than $1 billion dollars to businesses, the company was fined $250 million by the FDIC and Federal Reserve.
The company agreed to compensate businesses that were overcharged and claims it no longer misclassifies consumer cards as commercial.
Future Prevention
In addition to imposing fines and requiring repayment to affected businesses, the FDIC and Federal Reserve have issued orders mandating changes to Discover’s classification. The credit card company has 60 days to submit a plan to reform its oversight of interchange fees.
The agencies also specified that the merger with CapitalOne does not absolve Discover of its financial commitments or oversight reform obligations. CapitalOne will be required to fulfill all of the commitments Discover makes related to the interchange misclassification. CapitalOne and Discover issued a joint statement after the fines were announced and are committed to resolving the issue.
Discover Class Action – Recovering Your Money
If you accepted Discover cards between January 2007 and December 2023, you might be able to receive money back due to the misclassification of consumer cards. A class action lawsuit is pending, with up to date information available at DiscoverMerchantSettlement.com.
Once the claim information is available, you would need to submit a claim and provide necessary documentation, such as transaction records, to support your claim. There is no cost to submit a claim and most business owners can submit it on their own without additional help or support. Be sure to check the official website for any deadlines and make sure to provide all required information promptly.
Lowering Your Processing Costs
While there’s nothing you could have done to prevent this sort of misclassification of cards and subsequent higher fees, you may be able to do something about your overall cost of credit card processing.
If you’re concerned about the cost of your credit card processing solution, be sure to check out alternatives. For many businesses, credit card processing costs have risen to the point where they are second only to labor costs. It’s critical for your bottom line that your processing costs are as low as you can get them. Interchange plus pricing, lifetime rate locks, and statement monitoring can all help ensure your costs are as low as possible. If you need help, sign up for a free CardFellow account to see real pricing from multiple payment processors, with no sales pressure. You’ll be able to easily compare the best possible deals with your current solution and optionally talk to our experts for assistance. Try it now!
