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Troubled Debt Restructurings
The Company has internal loan modification programs that provide relief to credit card, personal loan and
student loan borrowers who are experiencing financial hardship. The internal loan modification programs include both
temporary and permanent programs which vary by product. External loan modification programs are also available for
credit card and personal loans. Temporary and permanent modifications on credit card and personal loans, as well as
temporary modifications on student loans and certain grants of student loan forbearance, are considered to be
individually impaired. In addition, loans that defaulted or graduated from modification programs or forbearance are
considered to be individually impaired. As a result, the above mentioned loans are accounted for as troubled debt
restructurings.
For credit card customers, the temporary hardship program primarily consists of a reduced minimum payment
and an interest rate reduction, both lasting for a period no longer than 12 months. The permanent workout program
involves changing the structure of the loan to a fixed payment loan with a maturity no longer than 60 months and
reducing the interest rate on the loan. The permanent modification program does not normally provide for the
forgiveness of unpaid principal, but may allow for the reversal of certain unpaid interest or fee assessments. The
Company also makes loan modifications for customers who request financial assistance through external sources, such
as a consumer credit counseling agency program (referred to here as external programs). These loans typically receive
a reduced interest rate but continue to be subject to the original minimum payment terms and do not normally include
waiver of unpaid principal, interest or fees.
To assist student loan borrowers who are experiencing temporary financial difficulties but are willing to resume
making payments, the Company may offer hardship forbearance periods of up to 12 months over the life of the loan.
Forbearance provides borrowers a deferment in making payments, during which time loan interest continues to accrue
at contractual rates. The Company does not anticipate significant shortfalls in the contractual amount due for borrowers
using a first hardship forbearance period as the historical performance of these borrowers is not significantly different
from the overall portfolio. However, when a borrower is 30 or more days delinquent and granted a second hardship
forbearance period, the forbearance is considered a troubled debt restructuring. In addition, the Company offers
temporary reduced payment programs, which normally consist of a reduction of the minimum payment for a period of
no longer than 12 months. When a student loan borrower is enrolled in a temporary reduced payment program for 12
months or fewer over the life of the loan, the modification is not considered a troubled debt restructuring. No loans
have been in a temporary modification program for greater than 12 months.
For personal loan customers, in certain situations the Company offers various payment programs, including
temporary and permanent programs. The temporary programs normally consist of a reduction of the minimum payment
for a period of no longer than 12 months with the option of a final balloon payment required at the end of the loan term
or an extension of the maturity date with the total term not exceeding nine years. Further, in certain circumstances the
interest rate on the loan is reduced. The permanent program involves changing the terms of the loan in order to pay off
the outstanding balance over a longer term and also in certain circumstances reducing the interest rate on the loan.
Similar to the temporary programs, the total term may not exceed nine years. The Company also allows loan
modifications for customers who request financial assistance through external sources, similar to the credit card
customers discussed above. Payments are modified based on the new terms agreed upon with the credit counseling
agency. Personal loans included in temporary and permanent programs are accounted for as troubled debt
restructurings.
The Company monitors borrower performance after using payment programs or forbearance and the Company
believes the programs help to prevent defaults and are useful in assisting customers experiencing financial difficulties.
The Company plans to continue to use payment programs and forbearance and, as a result, expects to have additional
loans classified as troubled debt restructurings in the future.