Discover 2015 Annual Report Download - page 150

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19. Commitments, Contingencies and Guarantees
Lease Commitments
The Company leases various office space and equipment under capital and non-cancelable operating leases,
which expire at various dates through 2028. Future minimum payments on capital leases were not material at
December 31, 2015. The following table shows future minimum payments on non-cancelable operating leases with
original terms in excess of one year (dollars in millions):
Operating
Leases
2016 .................................................................................................................................................................................... $ 14
2017 .................................................................................................................................................................................... 12
2018 .................................................................................................................................................................................... 11
2019 .................................................................................................................................................................................... 9
2020 .................................................................................................................................................................................... 7
Thereafter .............................................................................................................................................................................. 35
Total minimum lease payments ............................................................................................................................................ $ 88
Occupancy lease agreements, in addition to base rentals, generally provide for rent and operating expense
escalations resulting from increased assessments for real estate taxes and other charges. Total rent expense under
operating lease agreements, which considers contractual escalations, was $17 million, $16 million and $15 million for
the years ended December 31, 2015, 2014 and 2013, respectively.
Unused Commitments to Extend Credit
At December 31, 2015, the Company had unused commitments to extend credit for loans of approximately
$178.7 billion. Such commitments arise primarily from agreements with customers for unused lines of credit on certain
credit cards and certain other loan products, provided there is no violation of conditions in the related agreements.
These commitments, substantially all of which the Company can terminate at any time and which do not necessarily
represent future cash requirements, are periodically reviewed based on account usage, customer creditworthiness and
loan qualification.
Securitizations Representations and Warranties
As part of the Company’s financing activities, the Company provides representations and warranties that certain
assets pledged as collateral in secured borrowing arrangements conform to specified guidelines. Due diligence is
performed by the Company which is intended to ensure that asset guideline qualifications are met. If the assets pledged
as collateral do not meet certain conforming guidelines, the Company may be required to replace, repurchase or sell
such assets. In its credit card securitization activities, the Company would replace nonconforming receivables through
the allocation of excess seller’s interest or from additional transfers from the unrestricted pool of receivables. If the
Company could not add enough receivables to satisfy the requirement, an early amortization (or repayment) of
investors’ interests would be triggered. In its student loan securitizations, the Company would generally repurchase the
loans from the trust at the outstanding principal amount plus interest.
The maximum potential amount of future payments the Company could be required to make would be equal to
the current outstanding balances of third-party investor interests in credit card asset-backed securities plus the principal
amount of any other outstanding secured borrowings. The Company has recorded substantially all of the maximum
potential amount of future payments in long-term borrowings on the Company’s consolidated statements of financial
condition. The Company has not recorded any incremental contingent liability associated with its secured borrowing
representations and warranties. Management believes that the probability of having to replace, repurchase or sell
assets pledged as collateral under secured borrowing arrangements, including an early amortization event, is low.
Mortgage Loans Representations and Warranties
The Company sold loans it originated to investors on a servicing-released basis and the risk of loss or default by
the borrower is generally transferred to the investor. However, the Company was required by these investors to make
certain representations and warranties relating to credit information, loan documentation and collateral. These