Bread Financial Holdings (BFH) risk factors, FY2024 10-K

Other

1. 01This risk factor summary is qualified in its entirety by reference to the complete description of our risk factors set forth immediately below

Macroeconomic, Global, Strategic, Business and Competitive Risks

1. 02Weakness and instability in the macroeconomic environment could have a material adverse effect on our business, results of operations and financial condition
2. 03The loans we make are unsecured, and we may not be able to ultimately collect from customers that default on their loans
3. 04trends. In addition, targeted government efforts to forgive or discharge portions of student loan debt or provide additional relief may further influence these trends
4. 05relationships with a limited number of partners, and a decrease in business from, or the loss of, any of these partners could cause a significant drop in our revenue
5. 06Our business is heavily concentrated in U.S. consumer credit, and therefore our results are more susceptible to fluctuations in that market than a more diversified company
6. 07We expect growth to result, in part, from new and acquired credit card and other loan programs whose performance could result in increased portfolio losses and negatively impact our profitability
7. 08Our risk management policies and procedures may not be effective, and the models we rely on may not be accurate or may be misinterpreted
8. 09Fraudulent activity associated with our products and services could negatively impact our operating results, brand and reputation and cause the use of our products and services to decrease and our fraud losses to increase
9. 10The amount of our Allowance for credit losses could adversely affect our business and may prove to be insufficient to cover actual losses on our loans
10. 11We may not be successful in realizing the benefits associated with our acquisitions, dispositions and strategic investments, and our business and reputation could be materially adversely affected
11. 12Similarly, we may evaluate the potential disposition of, or elect to divest, assets or portfolios that no longer complement our long-term strategic objectives, as we did in November 2021, when we completed the spinoff of our LoyaltyOne segment. See also “Risks Related to the LoyaltyOne Spinoff.” below
12. 13Competition in our industry is intense, and the markets for the services that we offer may contract or fail to expand, each of which could negatively impact our growth and profitability
13. 14Our results of operations and growth depend on our ability to retain existing partners and attract new partners
14. 15Our results depend, to a significant extent, on the active and effective promotion and support of our products by our brand partners
15. 16Our results are impacted, to a significant extent, by the financial performance of our partners
16. 17We may not be successful in our efforts to promote usage of our DTC credit cards, or to effectively control the costs associated with such promotion, both of which may materially impact our profitability
17. 18Reductions in interchange fees, or changes in the laws and regulations governing such fees, could have various adverse impacts on our business and results of operations
18. 19We may not be able to retain and/or attract and hire a highly qualified and diverse workforce or maintain our corporate culture, and having a large segment of our workforce working from home may exacerbate these risks and cause new risks
19. 20integrity and decency. To the extent our leaders behave in a manner that is not consistent with our values, we could experience significant impacts to our brand and reputation, as well as to our corporate culture
20. 21Our operations and financial performance could be adversely affected by severe weather and natural disasters, as well as by climate change and ESG-related regulations and actions
21. 22Damage to our reputation could damage our business
22. 23Adverse financial market conditions or our inability to effectively manage our funding and liquidity risk could have a material adverse effect on our business, liquidity and ability to meet our debt service requirements and other obligations
23. 24If we are unable to securitize our credit card loans due to changes in the market or other circumstances or events, we may not be able to fund new credit card loans, which would have a material adverse effect on our operations and profitability
24. 25The occurrence of events that result in the early amortization of our existing credit card securitization transactions or an inability to delay the accumulation of principal collections for our existing credit card securitization transactions would materially adversely affect our liquidity
25. 26Lower payment rates on our securitized credit card loans could materially adversely affect our liquidity and financial condition
26. 27Inability to grow or maintain our deposit levels in the future could have a material adverse effect on our liquidity, ability to grow our business and profitability
27. 28Our level of indebtedness could materially adversely affect our ability to generate sufficient cash to repay our outstanding debt, and our ability to react to changes in our business and our incurrence of additional indebtedness to fund future needs could exacerbate these risks
28. 29Restrictions imposed by the indenture governing our senior notes, our credit agreement and our other outstanding or future indebtedness may limit our ability to operate our business and to finance our future operations or capital needs or to engage in other business activities
29. 30Any reduction in our credit ratings could increase the cost of our funding from, and restrict our access to, the capital markets and have a material adverse effect on our results of operations and financial condition
30. 31Changes in market interest rates could negatively affect our profitability
31. 32Future sales of our common stock, or the perception that future sales could occur, may adversely affect our common stock price
32. 33The market price and trading volume of our common stock may be volatile and our stock price could decline
33. 34We are a holding company and depend on payments from our subsidiaries
34. 35In preparing our financial statements we make certain assumptions, judgments and estimates that affect amounts reported in our audited Consolidated Financial Statements, which, if not accurate, may significantly impact our financial results

Legal, Regulatory and Compliance Risks

1. 36Our business is subject to extensive and evolving government regulation and supervision, which could materially adversely affect our results of operations and financial condition
2. 37See “Item 1. Business — Supervision and Regulation” for more information about certain laws and regulations to which we are subject and their impacts on us
3. 38Litigation and other actions and disputes could subject us to significant fines, penalties, judgments and/or requirements resulting in significantly increased expenses, damage to our reputation and/or a material adverse effect on our business
4. 39Our Banks are subject to extensive federal and state regulation that may restrict their ability to make cash available to us and may require us to make capital contributions to them
5. 40the capital requirements to which it is subject, we may be required to provide them with additional capital, which could also impair our ability to service our indebtedness
6. 41Increases in FDIC insurance premiums may have a material adverse effect on our results of operations
7. 42Noncompliance with the Bank Secrecy Act and other anti-money laundering statutes and regulations could cause us material financial loss
8. 43For more information on regulatory and legislative activity in this area, see “Privacy, Information Security and Data Protection” above
9. 44We have international operations that subject us to various international risks as well as increased compliance and regulatory risks and costs
10. 45Tax legislation initiatives or challenges to our tax positions could adversely affect our results of operations and financial condition

Cybersecurity, Technology and Vendor Risks

1. 46We rely on third-party vendors to provide various products and services that are important to our operations, and our business could be adversely impacted if our vendors fail to fulfill their obligations
2. 47Business interruptions, including loss of data center capacity, interruption due to cyber-attacks, loss of network connectivity or inability to utilize proprietary software of third-party vendors, could affect our ability to timely meet the needs of our partners and customers and harm our business
3. 48If we are not able to invest successfully in, and compete at the leading edge of, technological developments in our industry, our revenue and profitability could be materially adversely affected
4. 49The development and use of AI present risks and challenges that may adversely impact our business or customers

Risks Related to the LoyaltyOne Spinoff

1. 50The LoyaltyOne spinoff could result in substantial tax liability to us and our stockholders, and more generally, we may be adversely affected by LVI’s ongoing bankruptcy proceedings or pending or future litigation or other disputes involving or relating to LVI
2. 51Board and Board Committees
3. 52Risk Management Roles and Responsibilities
4. 53Our risk management team, which is led by our CRO and includes compliance, provides oversight of our risk profile and is responsible for maintaining a compliance program that includes compliance risk assessment, policy development, testing and reporting activities
5. 54Credit Risk is the risk arising from an obligor’s failure to meet the terms of any contract or otherwise perform as agreed. Credit Risk is found in all activities in which settlement or repayment depends on counterparty, issuer or borrower performance

Market Risk

1. 55Market risk is the risk to current or anticipated earnings, capital or economic value arising from changes in the market

Strategic Risk

1. 56Strategic Risk is the risk arising from adverse business decisions, poor implementation of business decisions or lack of responsiveness to changes in the industry and operating environment. This risk is a function of an organization’s strategic goals, business strategies, resources and quality of implementation
2. 57Reputational Risk is the risk arising from negative public opinion. This risk may impair competitiveness by affecting the ability to establish new relationships or services or continue servicing existing relationships