About the Discover Interchange Fee Settlement
Merchants that accepted Discover credit cards between 2007 and 2023 may be eligible to claim settlement funds set aside to compensate businesses for excessive interchange fees allegedly caused by systematic card misclassification during that period.
The watershed settlement represents one of the largest in US history, addressing nearly two decades of overcharges that potentially affected millions of merchants nationwide.
Why Discover Is Paying $1.2 Billion to Merchants
The heart of this massive settlement lies in a simple yet costly error that allegedly persisted for 17 years.
Miscoded transactions
According to the lawsuit, Discover's systems allegedly miscoded credit cards as commercial cards at businesses when customers used their personal Discover cards for purchases.
Consumer credit cards typically carry interchange fees around 1.4%, while commercial cards may command rates up to 2.4%.
That one percentage point difference, multiplied across millions of claimed transactions, created a staggering financial burden for US merchants.
Overwhelming error margins
Federal investigators potentially discovered that an astounding 98% of the approximately 5 million cards Discover classified as commercial were actually consumer cards used for personal purchases.
So, every time a customer bought groceries, filled up their gas tank, or purchased retail items with their personal Discover card, there was a 98% chance a merchant paid commercial-rate fees instead of the lower consumer rate.
Federal regulatory actions
The severity of Discover's misclassification practices prompted action from federal banking regulators.
The Federal Deposit Insurance Corporation (FDIC) issued three separate enforcement orders against Discover Bank, imposing a $150 million civil penalty specifically for the interchange rate dispute.
This penalty ranks among the largest ever levied by the FDIC for payment processing violations.
The Federal Reserve joined the enforcement action with its own $100 million penalty against Discover, citing failures in corporate governance and oversight that allowed the misclassification to continue unchecked for nearly two decades.
Together, these regulatory actions total $250 million in civil penalties alone, in addition to the $1.225 billion in restitution owed to merchants.
Lawsuit History, Allegations, and Settlement Terms
The Discover lawsuit began in the US District Court for the Northern District of Illinois, alleging that Discover knowingly or negligently misclassified millions of card transactions to generate excessive interchange fees.
Plaintiffs in this case presented evidence demonstrating that Discover's automated systems tended to default to a commercial classification for a significant portion of consumer cards, particularly those issued to customers who also held business accounts.
The class action lawsuit gained momentum when federal regulators launched parallel investigations. Internal documents obtained during the discovery process also showed that some employees raised concerns about classification accuracy years before the lawsuit, yet the bank implemented no comprehensive fixes.
Settlement agreement terms
Discover maintains it committed no wrongdoing but agreed to settle for $1.225 billion to avoid continued litigation costs, speaking volumes about the case's merits.
The settlement terms also include court-approved transparency requirements.
Discover must now:
- Provide detailed transaction coding information to merchants upon request.
- Allow businesses to verify proper classification in the future.
- Execute procedures to enable merchants to monitor and challenge improper fees proactively.
Who Qualifies for the Discover Merchant Settlement
The settlement defines three distinct categories of eligible class members, recognizing the complex ecosystem of modern payment processing
1. End Merchant Class
Businesses may qualify as end merchant members if they directly accepted Discover credit cards from customers between 2007 and 2023.
This category encompasses:
- Small retailers that processed cards through point-of-sale systems.
- E-commerce businesses accepting online payments.
- Service providers from plumbers to consultants.
- Restaurants, gas stations, and grocery stores.
- Any business that swiped, dipped, or keyed in Discover card transactions.
The settlement also recognizes four subcategories of end merchants based on their processing relationships, but all share equal rights to submit a claim.
2. Merchant Acquirers
Financial institutions and payment processors that maintained direct agreements with Discover to facilitate credit card transactions qualify as merchant acquirers.
These entities typically:
- Provided merchant accounts to businesses.
- Handled transaction authorization and settlement.
- Maintained the technical infrastructure for payment processing.
- Assumed financial responsibility for merchant transactions.
Businesses may qualify for this class based on their transaction volume, even if they operated as a merchant acquirer for only part of the class period.
3. Payment Intermediaries
This category captures modern payment processing for businesses that don’t contract directly with card networks.
Payment intermediaries include:
- Payment facilitators like PayPal, Stripe, and Square.
- E-commerce platforms with integrated payment processing.
- Marketplace operators who processed payments for sellers.
- Any other entity that facilitated Discover card acceptance without being classified as an end merchant or acquirer.
If the business accepted Discover cards through any third-party processor, it may be eligible to participate in the settlement even without a direct Discover relationship.
Transaction Date Requirements
Eligibility ultimately hinges on processing or accepting a misclassified card transaction between January 1, 2007, and December 31, 2023.
The settlement administrator will verify claims using Merchant Identifier (MID) numbers from Discover's records.
Businesses don't need perfect records spanning 17 years. The settlement administrator can locate transaction histories using standard business information (i.e., taxpayer identification number).
Even businesses that changed names, merged, or restructured during the class period may be eligible to participate based on their historical transactions.
How to File a Claim
Eligible members with or without an official claim notice may file an online claim.
With a Claimant ID and PIN
- Visit DiscoverMerchantSettlement.com
- Click "File a Claim"
- Enter your unique Claimant ID and PIN from your mailed or emailed notice
- Verify that the business information appears correctly
- Review the MIDs associated with your business
- Select payment method
- Submit claim
Without a Notice
Many eligible businesses won't receive direct notice due to outdated contact information or complex corporate structures.
These merchants can still file by:
- Visiting DiscoverMerchantSettlement.com.
- Selecting "File Without ID/PIN."
- Entering the business's legal name and any DBAs used during 2007-2023.
- Providing their federal tax ID number (EIN, SSN, or ITIN).
- Inputting contact information for claim correspondence.
- Answering questions about the Discover card acceptance history.
- Completing the certification and submitting.
The online portal saves partially completed claims and returns to them later, accommodating businesses that need to gather information from multiple sources or decision-makers.
Documentation Requirements
Most eligible claimants will need minimal documentation to file successful claims.
Basic requirements for all claimants
- Legal business name and any "doing business as" names.
- Federal taxpayer identification number.
- Current contact email and phone number.
- Authority to file on behalf of the business.
Additional Documentation (If Requested)
Some claims may trigger requests for supporting documentation, particularly for:
- High-volume merchants with substantial claimed amounts
- Businesses that underwent structural changes during the class period.
- Claims where initial database matches prove inconclusive.
The most common additional request involves submitting an IRS Form W-9 to verify tax identification numbers. Less frequently, the administrator might request merchant processing statements, corporate succession documents, or authorization letters for third-party filers.
Important Settlement Dates
- March 25, 2026: Opt-Out and Objection Deadline
- May 18, 2026: Final Claim Submission Deadline
- May 20, 2026: Court Fairness Hearing
- 240 Days After Final Approval: Payment Distribution
Verify Your Eligibility Status
Settlement notices contain unique IDs and PINs that confirm class membership and eligibility category.
Merchants who did not receive a notice can visit https://discovermerchantsettlement.com to check eligibility or find out more about the lawsuit and settlement terms.
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