Discover Financial Services faces a class-action lawsuit from investors alleging materially false and misleading statements regarding its business, operations, and compliance policies.
Pomerantz, a law firm representing investors, accused Discover of deficient risk management and compliance procedures, failing to comply with applicable student loan servicing standards, misclassifying certain credit card accounts, overcharging customers, and failing to stem its ballooning credit card delinquency rate, the firm announced Friday in a press release.
The lawsuit, filed in U.S. District Court for the Northern District of Illinois, follows executives of Discover admitting in a business call last month the company was “paying the price” for underinvesting in compliance.
“We’re going to make sure we don’t underinvest going forward,” Discover Chief Financial Officer John Greene said in the call, adding the company is “ensuring that we don’t put profits before compliance excellence.”
On Aug. 14, Discover announced Chief Executive Roger Hochschild would step down immediately and be replaced on an interim basis by John Owen. The move came amid regulatory troubles at the company, including disclosure of a proposed consent order from the Federal Deposit Insurance Corporation, that led to stock price drops that harmed investors, the lawsuit noted.
The suit demands Discover pay damages and other fees to the class.
Discover declined to comment.
During the August business call, Owen said the company hired more than 200 compliance personnel in recent months and replaced about half its senior management team.
No comments yet