The Federal Deposit Insurance Corporation (FDIC) has instructed Discover Bank to return over $1.2 billion to merchants who were overcharged due to excessive swipe fees and to pay a $150 million civil money penalty.
The regulatory authority found that for approximately 17 years, the Bank incorrectly classified millions of consumer credit cards as commercial, leading to inflated interchange fees for transactions on the Discover network. Consequently, merchants were overcharged by more than $1 billion in interchange fees related to these misclassified credit cards.
In a related action, the Board of Governors of the Federal Reserve System has mandated corrective measures and imposed a $100 million civil money penalty on Discover Bank’s parent company, Discover Financial Services, along with its subsidiary, DFS Services LLC.