Synchrony Financial (SYF) Accused of Misrepresenting Its Underwriting Practices

According to the complaint against the company's officers and directors, defendants breached their fiduciary duties by recklessly making false and misleading statements regarding Synchrony's underwriting practices and their impact on relationships with Synchrony's retail partners.

Synchrony Financial (SYF) claimed that it enforced disciplined underwriting practices to achieve a higher quality loan portfolio than those of its competitors, when in actuality Synchrony's underwriting standards were relaxed and extended private-label credit cards to riskier borrowers in order to sustain growth. This resulted in Synchrony's loan portfolio having greater credit risk than what was presented to the investing public, with a significantly higher likelihood of defaults, reserves, and charge-offs. When Synchrony tightened its credit practices, it lost its partnership with its highest revenue-producing account, Walmart, which had generated more than $10 billion in annual loan receivables and accounted for 19% of Synchrony's overall retail card balances. Walmart ultimately sued Synchrony for exposing the Walmart/Synchrony credit card program to significant unique credit risk and seeks damages "in an amount … estimated to be no less than $800 million." In addition to the Walmart action, Synchrony faces liability from federal securities fraud class actions.

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