(Reuters) – Shares of Discover Financial Services fell 12% in premarket trading on Thursday after the digital banking company disclosed that it was in discussions with regulators about how it misclassified certain credit card products for more than last 15 years.
The company incorrectly classified certain credit card accounts into its highest merchant and merchant acquirer pricing tier, beginning around mid-2007, Discover said after markets closed on Wednesday.
It has also received a proposed consent order from the Federal Deposit Insurance Corporation (FDIC) in connection with consumer compliance that does not include the card product classification matter.
Discover said it has decided to pause share repurchases while the internal review of compliance, risk management and corporate governance is pending.
The disclosures came in with the lender’s second-quarter results, which saw an 18% decline in its net income. The company’s earnings of $3.54 per share for the three months ended June 30 missed Wall Street expectations of $3.67 per share, according to Refinitiv IBES data.
However, Discover said it has determined that the revenue impact of the incorrect card product classification was not material to its consolidated financial statements for any of the affected periods.
(Reporting by Manya Saini in Bengaluru; Editing by Shweta Agarwal)
