Discover Financial Services has announced a proposed settlement in a class-action lawsuit accusing the company of overcharging merchants. The settlement, disclosed in a July 3, 2024, filing with the Securities and Exchange Commission (SEC), addresses the misclassification of certain card accounts into the highest merchant pricing tier since mid-2007. This error led to inflated charges for merchants over a decade. Discover has increased its liability to $1.2 billion to cover the expected payments under the settlement agreement, which is still pending court approval. The lawsuit's revelation follows the resignation of then-CEO Roger Hochschild in July 2023, shortly after the misclassification was publicly acknowledged.
The settlement news coincides with Discover's ongoing $35.3 billion acquisition by Capital One, one of the largest deals announced in 2024. The objective of the merger is to establish a global payments infrastructure that encompasses around 70 million merchant acceptance points in more than 200 countries and territories. However, regulatory scrutiny is anticipated, as highlighted by Consumer Financial Protection Bureau Director Rohit Chopra, who expressed concerns about the financial stability and competitive impacts of such mega-mergers. Additionally, Discover's Pulse Network recently settled a decade-old antitrust lawsuit against Visa, accusing it of anti-competitive practices in the debit card network services market. The terms of this settlement remain undisclosed.
