Discover Financial Services on Monday announced that longtime Discover executive Roger Hochshild, who has been president and CEO of the Riverwoods, Illinois-based financial services giant for the last five years, is resigning from the company effective immediately.
John Owen, a 38-year banking veteran and a member of Discover's board, has been appointed interim CEO and president while Discover works with a global executive search firm to find a replacement, Discover said in a press release. Hochschild will serve in an advisory capacity through the end of this year, according to the release.
"The Board and Roger have agreed that now is the right time to transition leadership, and we thank Roger for his 25 years of service to the company," said Tom Maheras, Discover's board chairman, in the release.
Hochschild, a 25-year veteran of Discover, added the CEO title in October 2018 after serving as president and chief operating officer since 2004. He replaced David Nelms, who had been CEO of Discover for 20 years.
Discover did not disclose reasons for Hochschild's sudden departure. But a series of investigations — both external and internal — preceded his exit.
Discover announced last month that an internal investigation revealed it had been
"Beginning around mid-2007, we incorrectly classified certain card accounts into our highest merchant and merchant-acquiring tier," Hochschild told investors when announcing second-quarter earnings on July 19.
Discover vowed to reimburse affected merchants and acquirers for what was likely to be less than two basis points of what merchants typically pay to accept Discover's credit cards, according to Hochschild. The company informed regulators about the misclassification, and Hochschild said he couldn't rule out the possibility of further regulatory action.
A year earlier, in July 2022, Hochschild also announced an independent
That incident came on the heels of Discover's efforts to resolve two previous Consumer Financial Services Bureau consent decrees dating back several years. The first consent agreement, reached in 2015, focused on violations around calculating student-loan interest and payment collection practices.
Shortly after
As a result of that glitch, Discover was
"We view today's announcement as a surprise given that the company had not previously signaled a CEO succession plan to the investor community," said Jon G. Arfstrom, associate director of U.S. research at RBC Capital Markets, in a Monday note to investors.
RBC's analyst expects Discover's shares to be under "modest pressure" in the short term as a result of the leadership shakeup. Arfstrom noted that the combination of the merchant-charging issue, ongoing loan-servicing problems and recent announcement of a pause in stock buybacks "is absolutely a perception headwind for the company in our view."
Hochschild's exit caps years of noteworthy achievements, including helping to shepherd the company from a monoline, U.S. card business into a complex worldwide payment firm with global acceptance and a wide array of lending products in the U.S. market, said Brian Riley, direct of credit advisory services and co-head of payments at Javelin & Research.
"Hochschild's resignation is indicative of Discover's commitment to compliance and pricing transparency, and a fresh start is likely the quickest way to clear the decks and move forward from these issues," Riley said.
