Former Discover executive accuses company of age and gender discrimination in court case
In a recent turn of events, Diane Offereins, a former executive at Discover, has filed a lawsuit against the company, claiming that she was retaliated against for raising concerns about improper credit card account classifications and that $7 million in stock awards were forfeited due to these allegations.
Offereins, who served as global chief information officer for about 11 years and president of payment services for close to 14 years, spent nearly 25 years at Discover before retiring in June 2023. According to her LinkedIn profile, she held a senior and oversight role at the company.
The card misclassification issue at Discover involves allegations that the company improperly classified certain credit card accounts in a way that resulted in higher fees and interest charges to consumers. This practice came under scrutiny when Offereins reportedly raised internal alarms about these misclassifications.
The lawsuit alleges that Discover cancelled Offereins' unvested stock awards in January, citing "misconduct." However, no evidence or explanation was provided to support this claim. Offereins lost more equity as a percentage of her total received equity than any other executive, including former CEO Roger Hochschild and current president of consumer banking Dan Capozzi, who was in charge of the unit responsible for the card misclassification for the last four years.
The misclassification allegedly caused harm to numerous cardholders, who may have been charged improper fees or higher interest rates, negatively impacting their credit and finances. The lawsuit also highlights internal controls, compliance culture, and responsiveness to whistleblower reports at Discover.
This case exemplifies the risks financial institutions face when internal compliance issues are not adequately addressed and when whistleblowers are discouraged, leading to legal and regulatory consequences.
The internal review into the card misclassification issue at Discover, known as "Project Simple," began in the first quarter of 2023. The lawsuit was filed in the U.S. District Court for the Northern District of Illinois and includes charges of breach of contract, gender and age discrimination against Discover.
In addition to Offereins' lawsuit, Discover is facing regulatory scrutiny over the card misclassification issue. The Consumer Financial Protection Bureau (CFPB) and other financial oversight authorities are investigating whether Discover's practices violated consumer protection laws or regulations governing fair lending and debt collection.
The Securities and Exchange Commission is also investigating the card misclassification issue at Discover, as the company disclosed last October. Discover publicly disclosed a card pricing error in the month following Offereins' retirement, which affected merchants and merchant acquirers. This error occurred due to the company mistakenly putting certain credit card accounts into its highest merchant and merchant acquirer price tier, resulting in overcharges.
The proposed merger between Discover and Capital One is awaiting regulatory approvals. Capital One has stated it's preparing for a significant undertaking in resolving Discover's compliance issues. Discover announced in July that it would settle class-action lawsuits related to the card misclassification issue for $1.2 billion.
Offereins cooperated with the internal investigation and was interviewed by outside counsel days after her retirement began. The investigation into the card misclassification issue at Discover was led by outside counsel and was "long-running."
The lawsuit mentions the possibility of purchasing licensing rights, suggesting that Offereins may be seeking to leverage her knowledge and experience in the industry to negotiate a settlement or partnership. This case continues to unfold, with potential implications for Discover, the credit card industry, and consumer protection regulations.
"Diane Offereins, with her extensive career in finance and business at Discover, is now pursuing a legal career, filing a lawsuit against the company for alleged retaliation and the forfeiture of $7 million in stock awards. This lawsuit, among other ongoing investigations and regulatory scrutiny, highlights the importance of proper business practices, internal controls, and responsiveness to whistleblower reports in the financial sector."
"The allegations against Discover, involving misclassification of credit card accounts and resulting higher fees and interest charges for consumers, not only pose potential legal and financial risks for the company, but also negatively impact the careers of executives involved, as Offereins lost more equity than any other executive due to these allegations."
