Discover Financial Services has reportedly reached an agreement with the Federal Deposit Insurance Corporation (FDIC) to improve consumer compliance.
This development resulted in a 7% surge in Discover Financial’s stock price in early trading, making it the top percentage gainer on the benchmark S&P 500, Reuters reported Monday (Oct. 2).
The consent order from the FDIC mandates Discover Financial to enhance its consumer compliance and related corporate governance, according to the report. To address issues identified in the consent order, the bank has taken substantial steps to strengthen its compliance management system.
Discover Financial Services said in a Friday (Sept. 29) filing with the Securities and Exchange Commission (SEC) that the FDIC issued the consent order on Sept. 25 following the consent of the board of directors of Discover Bank.
According to the filing, Discover Bank has agreed to improve its consumer compliance management system, enhance related corporate governance and enterprise risk management practices, and increase the level of board oversight over such matters.
“Management and the Board are committed to ensuring that all of the requirements of the consent order are met,” Discover Financial Services said in the filing. “The consent order does not contain any monetary penalties or fines.”
This turn of events follows a challenging period for Discover Financial in late July when it received a proposed consent order from the FDIC regarding consumer compliance, according to the Reuters report. The bank’s shares experienced a decline as it also disclosed a regulatory review concerning incorrectly classified credit card accounts dating back to mid-2007, which was unrelated to the FDIC consent order. Consequently, Discover Financial decided to temporarily halt its share repurchases.
With the regulatory review on the misclassification matter is still ongoing, Discover Financial has acknowledged the potential for additional enforcement actions or supervisory activity from the FDIC and other regulators, per the report.
Weeks after the company revealed it was the subject of a possible action by the FDIC, during an earnings call in July, the credit card provider announced on Aug. 15 that Discover President and CEO Roger Hochschild had resigned from his post.
“The Board is continuously focused on Discover reaching its full potential across the business, including our commitment to enhancing compliance, risk management and corporate governance,” the company said at the time.
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