Dive Brief:
- Discover Financial Services said today that its own internal investigation into its student loan servicing practices and related compliance matters has concluded, according to a filing with the Securities and Exchange Commission.
- Nonetheless, the Riverwoods, Illinois-based card company “continues to communicate with the supervisory staff of its regulators” regarding the investigation, “and it may be subject to reviews, investigations, proceedings, or other actions” connected to its student loan servicing, the filing said.
- Discover disclosed the probe in July, prompting a flurry of questions from analysts at that time. A “board-appointed independent special committee” oversaw the probe, the company said in today’s filing.
Dive Insight:
A Discover spokesperson didn’t immediately respond to requests for further comment, beyond the terse filing.
In 2015, the Consumer Financial Protection Bureau issued a consent order alleging Discover misstated minimum amounts due on billing statements for student loans, misstated tax information required for certain tax benefits and engaged in illegal debt collection. In December 2020, Discover signed another consent order with the Consumer Financial Protection Bureau and agreed to pay $35 million after the company violated the prior order.
The company’s most recent quarterly filing with the Securities and Exchange Commission noted that some of its subsidiaries are subject to a consent order with the CFPB “regarding certain private student loan servicing practices.”
A CFPB spokesperson said today the agency “can neither confirm nor deny the existence of any ongoing supervisory or enforcement work because that information is confidential.”
Earlier this year, the company said it was pausing its share buyback program in light of the investigation. With the investigation’s conclusion, Discover said in the filing it will resume share repurchases. Through its existing buyback program, the company has authorized up to $4.2 billion of share repurchases through June 30, 2023, per the filing.
Chief Financial Officer John Greene said in July the company took “a conservative approach" in pausing the buyback program, because it “became a matter of securities law” related to the investigation. During the company’s third-quarter earnings call Oct. 25, Discover executives said the investigation into its student loan business had yet to wrap up, but Greene and CEO Roger Hochschild were hopeful resumption of the share buyback program would occur in the fourth quarter.
