The proposed $1.225 billion Discover merchant fee settlement centers on how card networks set “interchange” fees—wholesale fees paid in the card-payment chain when a customer uses a card, typically borne by merchants through their processors. Different card types carry different rates, and “commercial” or business cards generally cost more to accept than standard consumer credit cards. In this case, Discover allegedly misclassified certain consumer credit card transactions as commercial transactions from January 1, 2007 through December 31, 2023, which would have caused merchants, merchant acquirers, and payment intermediaries (including companies processing through platforms like Stripe, Square, PayPal, or Shopify) to pay higher fees than necessary. The lawsuit was filed to recover those alleged overcharges and to create a standardized way for affected businesses to be reimbursed without each merchant having to litigate separately. The U.S. District Court for the Northern District of Illinois granted preliminary approval on July 30, 2025 (Case No. 1:23-CV-4676 and related cases), and claims are due by May 18, 2026; while the total fund is $1.225 billion, at least $540 million is set aside for distribution to the class, with individual payments depending on factors like transaction volume and the number of valid claims. Its significance is amplified by parallel regulatory findings: the FDIC and the Federal Reserve issued enforcement actions concluding merchants were overcharged by more than $1 billion, ordering restitution and imposing civil money penalties ($150 million from the FDIC and $100 million from the Fed), underscoring that fee coding and network rules are not just private contract issues but also subjects of bank and payment-system oversight. More broadly, the case fits into a long-running pattern of merchant-focused payment litigation and enforcement around card fees, network rules, and transaction labeling—areas where small technical classifications can translate into large costs at scale. The payments industry relies on standardized coding and compliance programs across networks, issuers, processors, and gateways, and errors or misstatements can ripple through pricing, merchant statements, and downstream pass-through fees for years before detection. Settlements like this also reinforce the practical expectation that card networks and their bank partners maintain strong governance, auditing, and controls to ensure the right interchange categories are applied, particularly as regulators scrutinize consumer harm, market conduct, and operational risk in core payment rails and bank-affiliated card programs