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standards should be applied, potentially materially impacting how we record and report our financial condition and results of
operations. We are also subject to FDIC increases in deposit insurance assessments or additional special assessments, which
could adversely affect our results of operations and financial condition. The Reform Act has removed the statutory cap for the
reserve ratio, leaving the FDIC free to set a cap in the future.
In addition, regulation of the payments industry, including regulation applicable to us, merchant acquirers and our other
business partners and customers, has expanded significantly in recent years. The Reform Act includes provisions governing
debit and credit card network businesses. In addition, various U.S. federal and state regulatory agencies and state legislatures
have considered new legislation or regulations relating to restrictions regarding fees and interchange charged to merchants and
acquirers, as well as additional charges for premium payment card transactions, and other restrictions related to identity theft,
privacy, data security and marketing that could have a direct effect on us and our merchant and financial institution customers.
In addition, the payments industry is the subject of increasing global regulatory focus, which may result in costly new
compliance burdens being imposed on us and our customers and lead to increased costs and decreased payments volume and
revenues. We, our Diners Club licensees and Diners Club customers are subject to regulations that affect the payments industry
in many countries in which our cards are used.
Failure to comply with laws and regulations could lead to adverse consequences such as financial, structural,
reputational and operational penalties, including receivership, litigation exposure and fines. Legislative and regulatory changes
could impact the profitability of our business activities, require us to limit or change our business practices, and expose us to
additional costs (including increased compliance costs). Significant changes in laws and regulations may have a more adverse
effect on our results of operations than on the results of our larger, more diversified competitors. For additional recent
legislative and regulatory developments that may affect our business, see “Management's Discussion and Analysis of Financial
Condition and Results of Operations - Regulatory Environment and Developments.”
Current and proposed regulation addressing consumer privacy and data use and security could inhibit the number of
payment cards issued and increase our costs.
Regulatory pronouncements relating to consumer privacy, data use and security affect our business. In the United States,
we are subject to a number of laws concerning consumer privacy and data use and security. We are subject to the Federal Trade
Commission's and the banking regulators' information safeguard rules under the Gramm-Leach-Bliley Act. The rules require
that financial institutions (including us) develop, implement and maintain a written, comprehensive information security
program containing safeguards that are appropriate to the financial institution's size and complexity, the nature and scope of the
financial institution's activities, and the sensitivity of any customer information at issue. The United States has experienced a
heightened legislative and regulatory focus on privacy, data security, including requiring consumer notification in the event of a
data breach. In addition, most states have enacted security breach legislation requiring varying levels of consumer notification
in the event of certain types of security breaches, and several other states are considering similar legislation.
Regulation of privacy, data use and security may cause an increase in the costs to issue payment cards and/or may
decrease the number of our cards that we or third parties issue. New regulations in these areas may also increase our costs to
comply with such regulations, which could negatively impact our earnings. In addition, failure to comply with the privacy and
data use and security laws and regulations to which we are subject, including by reason of inadvertent disclosure of confidential
information, could result in fines, sanctions, penalties or other adverse consequences and loss of consumer confidence, which
could materially adversely affect our results of operations, overall business and reputation.
Litigation and regulatory actions could subject us to significant fines, penalties and/or requirements resulting in increased
expenses.
Businesses in the credit card industry have historically been subject to significant legal actions, including class action
lawsuits and commercial, shareholder and patent litigation. Many of these actions have included claims for substantial
compensatory, statutory or punitive damages. For example, we currently have a class action lawsuit pending against us alleging
violations of the Telephone Consumer Protection Act, which prohibits contacting customers on their cellular telephones without
their express consent, and provides for significant statutory damages ($500 for each violation and $1,500 for willful violations).
While we have historically relied on our arbitration clause in agreements with customers to limit our exposure to consumer
class action litigation, there can be no assurance that we will continue to be successful in enforcing our arbitration clause in the
future. Legal challenges to the enforceability of these clauses have led most card issuers and may cause us to discontinue their
use. There are bills pending in Congress to directly or indirectly prohibit the use of pre-dispute arbitration clauses and the
Reform Act authorized the CFPB to limit or ban pre-dispute arbitration clauses. Further, we are involved in pending legal
actions challenging our arbitration clause. In addition, we may be involved in various actions or proceedings brought by
governmental regulatory agencies in the event of noncompliance with laws or regulations, which could harm our reputation,
require us to limit our business activities or subject us to significant fines, penalties or other requirements, resulting in increased
expenses. See Note 21: Litigation and Regulatory Matters for information regarding current matters.
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