Discover Financial Services (NYSE: DFS) Securities Fraud Class Action

DFS investors may receive additional information about the case by clicking the link "Submit Your Information" above.  If you are a member of the class described below, you may no later than October 31, 2023 move the Court to serve as lead plaintiff of the class, if you so choose.

A class action lawsuit has been filed on behalf of those who purchased or acquired Discover Financial Services ("DFS") (NYSE:  DFS) common stock between February 21, 2019 and August 14, 2023, both dates inclusive (the "Class Period").

Case Background:
The Class Period begins on February 21, 2019, the day after DFS filed an annual report on Form 10-K with the SEC after market close.  In addition to announcing the company’s financial and operational results, DFS also touted the purported efficacy of its ostensibly robust “enterprise-wide risk management framework to identify, measure, monitor, manage and report risks that affect or could affect the achievement of our strategic, financial and other objectives.” DFS stated that “[o]ur enterprise risk management philosophy is expressed through five key principles that guide our approach to risk management: Comprehensiveness, Accountability, Independence, Defined Risk Appetite and Transparency.”  Throughout the Class Period, DFS represented that it maintained robust risk management and compliance protocols for its various business segments and needs, including, among other things, its customer credit card and student loan practices.

The truth began to emerge on July 20, 2022, when DFS issued a press release announcing its financial results for the second quarter of 2022.  DFS disclosed in the report, among other things, an on-going internal investigation relating to its student loan servicing practices and related compliance matters.  Following this news, DFS’s stock price fell $9.80 per share, or 8.93%, to close at $100 per share on July 21, 2022.

Then on July 19, 2023, DFS issued a press release announcing its financial results for the second quarter of 2023 and revealed, among other things, that the company had misclassified certain credit card products over an approximate 15-year period as a result of an acknowledged compliance failure. Additionally, DFS disclosed receipt of a proposed consent order from the Federal Deposit Insurance Corporation in connection with an unrelated regulatory matter. Following this news, DFS’s stock price fell $19.40 per share, or 15.92%, to close at $102.45 per share on July 20, 2023.

Several weeks later, on August 14, 2023, DFS announced that its CEO will step down, effective immediately. That same day, in an exhibit to an SEC filing, DFS also disclosed that its credit card delinquency rate increased to 3.00% for the 24-month period ended July 31, 2023, as compared to 2.86% for the 24-month period ended June 31, 2023. Analyst Seeking Alpha reported that day that DFS’s credit card delinquency rate now stood at a higher level than the pre-pandemic rate of 2.37% in July 2019.

Finally, on August 15, 2023, Seeking Alpha published an article reporting on analyst’s speculation that DFS’s CEO’s resignation was directly tied to the company’s recently reported regulatory and risk oversight issues. Following this news, DFS’s stock price fell $9.69 per share, or 9.44%, to close at $92.96 per share on August 15, 2023.

The complaint alleges that, throughout the Class Period, Defendants made materially false and misleading statements regarding the company’s business, operations, and compliance policies.  Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (1) DFS maintained deficient risk management and compliance procedures; (2) as a result of the foregoing deficiencies, the company had failed to comply with applicable student loan servicing standards, misclassified certain credit card accounts, overcharged customers, and failed to stem its ballooning credit card delinquency rate; (3) the foregoing issues, when they became known, would subject DFS to significant financial exposure, regulatory scrutiny, and reputational harm; and (4) as a result, the company’s public statements were materially false and misleading at all relevant times. 

A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the Court must determine that the class member’s claim is typical of the claims of other class members, and that the class member will adequately represent the class. Your ability to share in any recovery is not, however, affected by the decision whether or not to serve as a lead plaintiff. Filling out the online form above or communicating with any counsel is not necessary to participate or share in any recovery achieved in this case.  Any member of the purported class may move the court to serve as a lead plaintiff through counsel of his/her choice, or may choose to do nothing and remain an inactive class member.

If you wish to discuss this action or have any questions concerning this notice or your rights or interests with respect to these matters, please contact Kessler Topaz Meltzer & Check, LLP:  Jonathan Naji, Esq. (484) 270-1453 or via e-mail at info@ktmc.com.  If you would like additional information about the suit, please click on the link "Submit Your Information" above and fill out the form as promptly as possible.