Discover 2010 Annual Report Download - page 48

increases in deposit insurance assessments or additional special assessments, which could adversely affect our results of
operations and financial condition.
Failure to comply with laws, regulations and other requirements could lead to adverse consequences such as financial,
structural, reputational and operational penalties, including receivership, litigation exposure and fines. In addition, efforts
to abide by these laws and regulations may increase our costs of operations or limit our ability to execute our business
strategies and engage in certain business activities, including affecting our ability to generate or collect receivables from
customers.
Laws, regulations, and supervisory guidance and practices, or the application thereof, may adversely affect our
business, financial condition and results of operations.
Proposals for legislation further regulating matters affecting public companies are continually being introduced in the
U.S. Congress and in state legislatures, including reforms related to health care, employment and particularly the
financial services industry. The Reform Act, which was enacted in July 2010, significantly impacts the financial services
industry. Among other things, the Reform Act established the Bureau of Consumer Financial Protection to regulate
consumer financial services and products, including credit, savings and payment products.
The agencies regulating the financial services industry also periodically adopt changes to their regulations and
supervisory guidance and practices. In light of recent conditions in the U.S. financial markets and economy, as well as a
heightened regulatory and Congressional focus on consumer lending, regulators have increased their scrutiny of the
financial services industry, the result of which has included new regulations and guidance. We are unable to predict the
long-term impact of this enhanced scrutiny. We are also unable to predict whether any additional or similar changes to
statutes or regulations, including the interpretation or implementation thereof, will occur 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 are considering 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, affect
retention of our key employees, 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 – Legislative and
Regulatory 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 data security, including requiring
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