Class action lawsuit resolved for merchants affected by pricing error

  • Discover Financial settles class action lawsuit over card product misclassification
  • Misclassification affected pricing for merchants and merchant acquirers, not cardholders
  • Liability increased to $1.2 billion to cover refunds

Discover Financial Services has entered a settlement agreement to resolve a class-action lawsuit filed by merchants allegedly impacted by the misclassification of certain credit card accounts into its highest merchant and merchant acquirer pricing tier. The company, along with subsidiaries, said the agreement is subject to court and other approvals. As of March 31, Discover increased its liability for refunds due to the misclassification to $1.2 billion, which is expected to cover all payments under the settlement. The error in classification began in mid-2007 and affected pricing for merchants and merchant acquirers but not cardholders. Discover had previously disclosed cooperation with a Securities and Exchange Commission investigation into the matter.

Factuality Level: 8
Factuality Justification: The article provides accurate information about Discover Financial Services’ settlement agreement and its impact on the company’s liability without any sensationalism or opinion. It also mentions the SEC investigation into the matter.
Noise Level: 7
Noise Justification: The article provides relevant information about Discover Financial Services’ settlement agreement related to a credit card misclassification issue and its impact on merchants and liability. However, it lacks in-depth analysis or actionable insights for readers.
Public Companies: Discover Financial (DFS)
Key People: Stephen Nakrosis (Writer)

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Financial Relevance: Yes
Financial Markets Impacted: Discover Financial Services
Financial Rating Justification: The article discusses Discover Financial Services’ error in classifying credit card accounts, which led to a settlement agreement and an increase in liability. This affects the company’s financial situation and could impact its stock price and reputation, making it financially relevant.
Presence Of Extreme Event: No
Nature Of Extreme Event: No
Impact Rating Of The Extreme Event: No
Extreme Rating Justification: No extreme event mentioned in the text.

Reported publicly: www.wsj.com