Discover Financial faces regulatory scrutiny and legal investigation over credit card misclassification

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Discover Financial faces regulatory scrutiny and legal investigation over credit card misclassification
Credit: © Reuters.

Discover Financial Services (NYSE: DFS ) is currently under scrutiny after confessing in July 2023 to a misclassification error that placed some credit card accounts in its highest pricing tier since 2007, leading to overcharges for merchants. The company is discussing this issue with regulators and is also dealing with a separate consumer compliance matter, which has resulted in a proposed consent order from the Federal Deposit Insurance Corporation (FDIC).

The disclosure of these issues triggered a significant fall in Discover Financial's stock value, with a 16% drop following the initial revelation. The situation further escalated when Roger Hochschild resigned from his positions as President, CEO, and board member in August 2023, causing an additional 9.5% fall in share price.

As of October 2023, Discover Financial is cooperating with an investigation by the Securities and Exchange Commission (SEC) into the misclassification matter. The investigation aims to determine whether the company's board of directors breached securities laws or their fiduciary duties.

In parallel to these developments, Kaskela Law LLC is encouraging long-term shareholders of Discover Financial to contact them regarding this investigation and their legal rights. The law firm's inquiry focuses on potential securities law violations or breaches of fiduciary duty by the board members of Discover Financial.

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