The Federal Deposit Insurance Corporation (FDIC) has directed Discover Bank to return over $1.2 billion to merchants who were overcharged on swipe fees.

This significant restitution follows a long-standing issue where the bank misclassified consumer credit cards as commercial ones, leading to inflated interchange fees when those cards were used for transactions. Alongside the order for repayment, the FDIC imposed a $150 million civil money penalty on Discover Bank.

The regulatory investigation found that Discover had been misclassifying millions of consumer credit cards over a span of approximately 17 years. This misclassification caused merchants to incur higher transaction fees whenever these cards were used on the Discover network. The cumulative impact of these incorrect charges resulted in more than $1 billion in excessive costs borne by businesses across the country.

In a related action, the Federal Reserve’s Board of Governors also took enforcement steps. Discover Financial Services—the parent company of Discover Bank—and its subsidiary, DFS Services LLC, were ordered to implement corrective measures. In addition, the Federal Reserve levied a $100 million civil penalty against the entities, further underscoring the seriousness of the violations and the need for accountability in financial practices.