NEW YORK, Sept. 17, 2023 (GLOBE NEWSWIRE) — Pomerantz LLP announces that a class action lawsuit has been filed against Discover Financial Services (“DFS” or the “Company”) (NYSE: DFS) and certain officers. The class action, filed in the United States District Court for the Northern District of Illinois, Eastern Division, and docketed under 23-cv-06788, is on behalf of a class consisting of all persons and entities other than Defendants that purchased or otherwise acquired DFS common stock between February 21, 2019 and August 14, 2023, both dates inclusive (the “Class Period”), seeking to recover damages caused by Defendants’ violations of the federal securities laws and to pursue remedies under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder, against the Company and certain of its top officials.
If you are a shareholder who purchased or otherwise acquired DFS common stock during the Class Period, you have until October 31, 2023 to ask the Court to appoint you as Lead Plaintiff for the class. A copy of the Complaint can be obtained at www.pomerantzlaw.com. To discuss this action, contact Robert S. Willoughby at newaction@pomlaw.com or 888.476.6529 (or 888.4-POMLAW), toll-free, Ext. 7980. Those who inquire by e-mail are encouraged to include their mailing address, telephone number, and the number of shares purchased.
[Click here for information about joining the class action]
DFS is an American financial services company that owns and operates Discover Bank, an online bank that offers checking and savings accounts, personal loans, home equity loans, student loans, and credit cards. DFS’s shares trade on the New York Stock Exchange under the ticker symbol “DFS”.
At all relevant times, DFS represented that it maintained robust risk management and compliance protocols for its various business segments and needs, including, among other things, its customer credit card and student loan practices.
The complaint alleges that, throughout the Class Period, Defendants made materially false and misleading statements regarding the Company’s business, operations, and compliance policies. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) DFS maintained deficient risk management and compliance procedures; (ii) as a result of the foregoing deficiencies, the Company had, inter alia, failed to comply with applicable student loan servicing standards, misclassified certain credit card accounts, overcharged customers, and failed to stem its ballooning credit card delinquency rate; (iii) the foregoing issues, when they became known, would subject DFS to significant financial exposure, regulatory scrutiny, and reputational harm; and (iv) as a result, the Company’s public statements were materially false and misleading at all relevant times.
On July 20, 2022, DFS issued a press release announcing its financial results for the second quarter of 2022. Among other items, DFS disclosed that it “is suspending until further notice its existing share repurchase program because of an internal investigation relating to its student loan servicing practices and related compliance matters.” The Company also advised that “[t]he investigation is ongoing and is being conducted by a board-appointed independent special committee.”
On this news, DFS’s stock price fell $9.80 per share, or 8.93%, to close at $100 per share on July 21, 2022.
On July 19, 2023, DFS issued a press release announcing its financial results for the second quarter of 2023. Among other items, DFS disclosed that it had misclassified certain credit card products over an approximate 15-year period as a result of an acknowledged compliance failure. Specifically, DFS disclosed that it had incorrectly classified certain credit card accounts into its highest merchant and merchant acquirer pricing tier, beginning around mid-2007. In addition, the Company disclosed receipt of a proposed consent order from the Federal Deposit Insurance Corporation in connection with an unrelated regulatory matter.
On this news, DFS’s stock price fell $19.40 per share, or 15.92%, to close at $102.45 per share on July 20, 2023.
On August 14, 2023, DFS issued a press release announcing that its Board of Directors (the “Board”) and Defendant Roger C. Hochschild (“Hochschild”) “have agreed that Hochschild will step down as Chief Executive Officer and President and as a member of the Board”, effective immediately. Notably, the same press release also quoted DFS’s Chair of the Board, who assured investors that “[t]he Board is continuously focused on Discover reaching its full potential across the business, including our commitment to enhancing compliance, risk management and corporate governance.”
That same day, in an exhibit to a filing with the U.S. Securities and Exchange Commission, DFS also disclosed that its credit card delinquency rate increased to 3.00% for the 24-month period ended July 31, 2023, as compared to 2.86% for the 24-month period ended June 31, 2023. As reported by Seeking Alpha that day, the Company’s credit card delinquency rate now stood at a higher level than the pre-pandemic rate of 2.37% in July 2019.
Then, on August 15, 2023, Seeking Alpha published an article reporting on analyst speculation that Defendant Hochschild’s resignation was directly tied to DFS’s recently reported regulatory and risk oversight issues.
Following these developments, DFS’s stock price fell $9.69 per share, or 9.44%, to close at $92.96 per share on August 15, 2023.
Finally, on August 17, 2023, during an earnings call hosted by DFS, the Company’s top officers acknowledged that it was “paying the price” for past underinvestment in compliance, stressing that Defendant Hochschild’s abrupt departure reflected a commitment to moving past regulatory troubles, thereby validating previously reported analyst suspicions on the matter.
Pomerantz LLP, with offices in New York, Chicago, Los Angeles, London, Paris, and Tel Aviv, is acknowledged as one of the premier firms in the areas of corporate, securities, and antitrust class litigation. Founded by the late Abraham L. Pomerantz, known as the dean of the class action bar, Pomerantz pioneered the field of securities class actions. Today, more than 85 years later, Pomerantz continues in the tradition he established, fighting for the rights of the victims of securities fraud, breaches of fiduciary duty, and corporate misconduct. The Firm has recovered billions of dollars in damages awards on behalf of class members. See www.pomlaw.com.
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CONTACT:
Robert S. Willoughby
Pomerantz LLP
rswilloughby@pomlaw.com
888-476-6529 ext. 7980
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