Discover 2015 Annual Report Download - page 24

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Each credit card transaction is subject to screening, authorization and approval through a proprietary POS
decision system and each deposit transaction is subject to screening and approval through a dynamic transaction
evaluation and scoring methodology. We use a variety of techniques that help identify and halt fraudulent transactions,
including adaptive models, rules-based decision-making logic, report analysis, data integrity checks and manual
account reviews. We manage accounts identified by the fraud detection system through technology that integrates fraud
prevention and customer service. Strategies are subject to regular review and enhancement to enable us to respond
quickly to changing conditions as well as to protect our customers and our business from emerging fraud activity.
Product Terms and Conditions
Credit Cards
The terms and conditions governing our credit card products vary by product and change over time. Each credit
card customer enters into a cardmember agreement governing the terms and conditions of the customer's account.
Discover card's terms and conditions are generally uniform from state to state. We are allowed, to the extent permitted
by law, to change any term of the cardmember agreement, including any finance charge, rate or fee, or add or delete
any term of the cardmember agreement, with notice to the customer as required by law. The customer has the right to
opt out of certain changes of terms and pay their balance off under the original terms. Each cardmember agreement
provides that the account can be used for purchases, cash advances and balance transfers. Each Discover card account
is assigned a credit limit when the account is initially opened. Thereafter, individual credit limits may be increased or
decreased from time to time, at our discretion, based primarily on our evaluation of the customer's creditworthiness. We
offer various features and services with the Discover card accounts, including the Cashback Bonus rewards programs
described under “— Marketing — Rewards/Cashback Bonus.”
All Discover card accounts generally have the same billing structure. We generally send a monthly billing
statement to each customer who has an outstanding debit or credit balance. Customers also can waive their right to
receive a physical copy of their bill, in which case they will receive email notifications of the availability of their billing
statement online. Discover card accounts are grouped into multiple billing cycles for operational purposes. Each billing
cycle has a separate billing date, on which we process and bill to customers all activity that occurred in the related
accounts during a period of approximately 28 to 32 days that ends on the billing date.
Discover card accounts are assessed periodic finance charges using fixed and/or variable interest rates. Certain
account balances, such as balance transfers, may accrue periodic finance charges at lower fixed rates for a specified
period of time. Variable rates are indexed to the highest prime rate published in The Wall Street Journal on the last
business day of the month. Periodic finance charges are calculated using the daily balance (including current
transactions) method, which results in daily compounding of periodic finance charges, subject to a grace period on new
purchases. The grace period provides that periodic finance charges are not imposed on new purchases, or any portion
of a new purchase, that is paid by the due date on the customer's current billing statement if the customer paid the
balance on his or her previous billing statement in full by the due date on that statement. Neither cash advances nor
balance transfers are subject to a grace period.
Each customer with an outstanding debit balance on his or her Discover card account must generally make a
minimum payment each month. If a customer exceeds his or her credit limit as of the last day of the billing period, we
may include all or a portion of this excess amount in the customer's minimum monthly payment. A customer may pay
the total amount due at any time. We also may enter into arrangements with delinquent customers to extend or
otherwise change payment schedules, and to waive finance charges and/or fees, including re-aging accounts in
accordance with regulatory guidance.
In addition to periodic finance charges, we may impose other charges and fees on Discover card accounts,
including cash advance transaction fees, late fees where a customer has not made a minimum payment by the required
due date, balance transfer fees and returned payment fees. We also charge fees each time we decline to honor a
balance transfer check, cash advance check, or other promotional check due to such reasons as insufficient credit
availability, delinquency or default.
The Credit Card Accountability Responsibility and Disclosure Act of 2009 (the "CARD Act") required us to
review, every six months, certain interest rates that were increased on accounts since January 1, 2009 to determine
whether to reduce the interest rate based on the factors that prompted the increase or factors we currently consider in
determining interest rates applicable to similar new credit card accounts. The amount of any rate decrease must be
determined based upon our reasonable policies and procedures. Any reduced interest rate must be applied to the
account not later than 45 days after completion of the review.