About Bread Financial Holdings

Bread Financial Holdings, Inc. operates as a tech-forward financial services company that provides simple, personalized payment, lending and saving solutions. The company creates opportunities for its customers and partners through digitally enabled choices that offer ease, empowerment, financial flexibility and exceptional customer experiences. Driven by a digital-first approach, data insights and white-label technology, the company delivers growth for its partners through a comprehensive product suite, including private label and co-brand credit cards and buy now, pay later (BNPL) products, such as installment loans and the company’s ‘split-pay’ offerings. The company also offers direct-to-consumer solutions that give customers more access, choice and freedom through the company’s branded Bread Cashback American Express Credit Card and Bread Savings products. The company’s partner base consists of large consumer-based businesses, including well-known brands, such as AAA, Academy Sports + Outdoors, Caesars, Dell Technologies, the NFL, Signet, Ulta and Victoria’s Secret, as well as small- and medium-sized businesses (SMBs). The company’s partner base is well diversified across a broad range of industries, including travel and entertainment, health and beauty, jewelry, sporting goods, home goods, technology and electronics and the industry in which the company first began, specialty apparel. The company’s comprehensive suite of payment, lending and saving solutions, along with the company’s related marketing and data and analytics, offers the company a significant competitive advantage with products relevant across all customer segments (Gen Z, Millennial, Gen X and Baby Boomers). The breadth and quality of the company’s product and service offerings have enabled the company to establish and maintain long-standing partner relationships. The company continues to make strategic investments in digital and technology, including cloud capabilities, emerging technologies and automation, and data and analytics, all the while enhancing its governance and control over the availability, quality and security of the company’s data. These strategic investments are in addition to ongoing investments in the support of delivering customer experiences across all channels and investing in the talent needed to improve the company’s competitive position and drive ongoing responsible growth. The company’s digital and technology investments have and will continue to promote new account originations, brand and customer engagement, and improved customer experience, making it easier for customers to finance purchases and make payments wherever they occur— online, in store and in-app. With the company’s range of offerings, the company provides relevant products across consumer segments, including Gen Z and Millennials who are more likely to be drawn to cash flow management products, such as BNPL, while Gen X and Baby Boomers generally gravitate toward rewards and the convenience of a private label or co-brand card. In addition, the company continues to develop and scale the company’s direct-to-consumer lending and payment products for new and existing customers, including through the company’s proprietary credit cards and Bread Savings products. The company also continues to diversify and optimize its portfolio, prioritizing the company’s investment in strong and profitable partners, industries and affinity brands, while also continuing to develop the company’s Bread Pay products and exploring various strategic business opportunities adjacent to the company’s core private label and co-brand credit card business (business adjacencies) in an evolving payments, macroeconomic and regulatory environment. Primary Product Offerings The company’s primary product offerings consist of its private label and co-brand credit card programs with retailers and other brand partners; direct-to-consumer credit cards (DTC or retail); Bread Pay products; and Bread Savings products. These product offerings are not exclusive, and, where appropriate, the company seeks to introduce partners and customers to its other product offerings. Private Label and Co-Brand Credit Card Lending The company’s core business, historically, has been working with many of the country’s best-known brands and retailers (who the company calls its partners or brand partners) to drive sales and loyalty through their private label and co-brand credit card programs. In these programs, the company (through the company’s Banks) is the credit card issuer and lender to the company’s partners’ customers, and the company also services the loans and provides a variety of other related services. The company’s private label and co-brand partner base, with approximately 100 brands and numerous online merchants, consists of many large consumer-based businesses, including well-known brands such as AAA, Academy Sports + Outdoors, Caesars, Dell Technologies, the NFL, Signet, Ulta and Victoria’s Secret. The company’s partners benefit from customer insights and analytics, with each of the company’s branded credit card programs tailored to the company’s partner’s brand and their unique customers. The company’s private label and co-brand program agreements with its brand partners are generally long-term, exclusive contracts, with terms typically ranging from 5 to 10 years. As of December 31, 2023, the company’s top five partner contracts (based on end-of-period loan balances) were secured through 2028, and more than 85% of the company’s loan portfolio is secured through 2025. The company’s co-brand credit cards are general purpose credit cards that can be used to purchase goods and services from the applicable partner, as well as other retailers wherever cards from those card networks are accepted. The company issues co-brand credit cards for use on the MasterCard and Visa networks. Credit extended under the company’s co-brand credit cards typically is extended on standard terms only. Direct-to-Consumer Credit Cards In the second quarter of 2022, the company launched its branded Bread Cashback credit card, which is a DTC, general purpose cashback credit card, and is an important product for the company to capture incremental, non-discretionary spend and build and retain customer relationships. As a DTC product, the company’s Bread Cashback credit card and other proprietary cards the company may issue are not dependent upon the performance of the company’s brand partners or impacted by any partner revenue-sharing obligations. The company’s Bread Cashback credit card will continue to increase the company’s total addressable market, including within the Millennial and Gen Z populations, offering unlimited 2% cashback, no annual fee, no foreign transaction fees, premium protection benefits, American Express lifestyle benefits and instant mobile acquisition and wallet provisioning. In addition, in the fourth quarter of 2023, the company introduced its newest DTC general purpose credit card, the Bread Rewards American Express Credit Card, and successfully converted approximately 570,000 existing cardholders from the company’s legacy Comenity-branded general purpose cash-back credit card to this new card. The company expects that its Bread Rewards credit card, which offers 3% rewards points on gas station, grocery store, dining and utility purchases, among other benefits, will be available to the public during the first half of 2024. The company issues its DTC credit cards on the American Express network. Bread Pay Bread Pay is the company’s BNPL payment technology solution, which includes both the company’s installment loan and ‘split-pay’ offerings. Through Bread Pay, the company offers an omnichannel solution for more than 1,100 SMB retailers and merchants, and the company continues to explore and pursue growth opportunities in various business adjacencies, including through the integration of the company’s suite of products (primarily Bread Pay installment loans) into third-party platforms to gain efficient distribution of the company’s lending solutions. The expansion of the company’s Bread Pay products is an attractive growth opportunity for the company due to, in part, the Bread Pay loan portfolio not generally having exposure to potential regulatory actions placing limits on credit card late fees. The company’s Bread Pay offerings and on-boarding capabilities enhance the company’s growth prospects across the industries in which the company lends and increases the addressable market of the company’s Bread Pay partners. Bread Pay also offers the company’s existing private label and co-brand credit card partners a broader digital product suite and additional white-label product solutions for those customers preferring a ‘closed-end’ payment option (i.e., a non-revolving loan with fixed repayment terms). The company offers a flexible platform and robust suite of application programming interfaces (APIs) that allow merchants and partners to seamlessly integrate online point-of-sale financing and other digital payment products. During 2023, the company migrated its Bread Pay partners from the company’s legacy platform to its new Bread Pay 2.0 platform. The company’s Bread Pay installment loans are closed-end credit accounts where the customer pays down the outstanding balance in monthly installments, typically over a 3 to 48 month period. The terms of the company’s installment loans are governed by customer agreements and applicable laws and regulations. Installment loans are generally assessed interest charges using fixed interest rates. The company does not impose other charges or fees on loan accounts, such as late fees, where a customer has not made the required payment by the required due date, or returned payment fees. The company’s ‘split-pay’ loans are short-term, interest-free financing, to be repaid by the customer in four equal installments, with the first payment due at the time of purchase and the remaining three payments due in subsequent two-week intervals. The terms of the company’s split-pay loans are governed by customer agreements and applicable laws and regulations. The company does not impose charges or fees on these split-pay loan accounts either, whether that be late fees or returned payment fees. Bread Savings Bread Savings refers to the company’s DTC, or retail, deposit products, primarily in the form of certificates of deposit and savings accounts. The company’s Bread Savings products support loan growth and improve the company’s funding mix, making the company less reliant on other sources of wholesale funding. The company’s online Bread Savings platform is scalable allowing the company to expand without having to rely on a traditional ‘brick and mortar’ branch network. The company continues to focus on growing its Bread Savings operations and the company is well-positioned to continue to benefit from the consumer-driven shift from branch banking to direct-banking. Services Supporting the company’s Primary Product Offerings The company’s primary product offerings, as described above, are supported and enhanced by numerous services and capabilities that the company provide, including: (i) risk management, account origination and funding services; (ii) loan processing and servicing; (iii) marketing, and data and analytics; and (iv) the company’s digital and mobile capabilities. Risk Management, Account Origination and Funding Services. The company provides risk management solutions, account origination and funding services for the company’s private label and co-brand credit card programs, as well as the company’s Bread Pay partnerships. The company processes millions of credit card applications each year using automated proprietary scoring technology and verification procedures to make responsible risk-based underwriting and origination decisions when approving new accounts and establishing credit limits. Credit quality is monitored on a regular and consistent basis, using internal algorithms and external credit bureau risk scores. This information helps the company segment new and existing customers into narrower risk ranges, allowing the company to better evaluate individual credit risk. As macroeconomic conditions have weakened over recent years, the company has continued to enhance its credit risk management, including through stronger underwriting resulting from enhanced technology, monitoring, and data, prudent and proactive credit line management, and well-established risk appetite metrics, and the company is proactively applying its recession readiness playbook. Loan Processing and Servicing. The company manages and services the loans it originates for the company’s private label and co-brand credit card programs, as well as the company’s DTC credit cards and Bread Pay products. In 2022, the company completed the transition of its credit card processing services to Fiserv, a leading global provider of outsourced payments and financial services technology solutions; this transition enables improved speed to market, including the ability to quickly and seamlessly add new products and capabilities that benefit the company’s partners and cardholders. It has also strengthened the company’s ability to ensure the company is operating on a compliant core platform, and enabled efficient integration of digital technology, while supporting the company’s data and analytics capabilities and improving operational efficiencies. The company’s customer care operations offer omnichannel servicing, including phone, mail, fax, email, text, smartphone application and web. The company provides focused training programs in all areas to achieve the highest possible customer service standards and customer experience, and monitor the company’s performance by conducting surveys with the company’s partners and its customers. The company blends domestic and off-shore locations as an important part of the company’s servicing strategy, to maintain service availability beyond normal work hours in the United States. Marketing, and Data & Analytics. Through the company’s integrated marketing services, the company designs and implements strategies that assist its partners in acquiring, retaining and expanding customer engagement to drive a more loyal, frequent shopper that increases customer lifetime value. The company’s programs capture transaction data that the company analyzes to better understand consumer behavior, which the company uses to increase the effectiveness of its partners’ marketing activities. Through the company’s data and analytics capabilities, including machine learning and artificial intelligence, the company focuses on data insights that drive actionable strategies and enhance revenue growth and customer retention. The company uses multi-channel marketing communication tools, including in-store, web, permission-based email, permission-based mobile messaging and direct mail to engage customers in the channel of their choice. Digital and Mobile Capabilities. The company is constantly seeking to improve its digital and mobile capabilities, in order to support and enhance the company’s product offerings, drive growth for the company’s brand partners and improve the customer experience. The company seeks to provide a seamless, personalized digital and mobile experience that is responsive to the company’s customers’ evolving expectations, while also providing the data and tools necessary to proactively identify and address future customer needs. During 2023, the company made significant improvements to its digital and mobile capabilities, including API enhancements, enriched software development kits, virtual card commercialization and the company’s new Bread Financial mobile app, which the company launched to Bread Cashback credit card customers in the fourth quarter of 2023, and will roll out to brand partner customers starting in the first quarter of 2024. The company is continually seeking to enhance customers’ self-service capabilities in the company’s digital channels, which allows customers to address their own needs when and how they want. In addition, through the company’s Enhanced Digital Suite, a group of marketing and credit application features, the company helps its brand partners capitalize on online trends by bringing through more qualified applicants, a higher credit sales conversion rate and a higher average purchase value. Enhanced Digital Suite includes a unified software development kit that provides access to the company’s broad suite of products; it also promotes credit payment options, relevant to the customer, earlier in the shopping experience. The credit application is simple and easy, offers prefilled fields and pre-screens customers in real-time, allowing for immediate credit approval without leaving the brand partner’s site. Across all of the company’s product offerings, the company remains focused on creating an exceptional digital and mobile experience for the company’s customers, which will drive future growth. Technology/Systems The company leverages information and technology to help achieve the company’s business objectives and to develop and deliver products and services that satisfy the company’s brand partners’ and customers’ needs. A key part of the company’s strategic focus is the development and use of efficient, flexible computer and operational systems, such as cloud technology, to support complex marketing and account management strategies, the servicing of the company’s customers, and the development and scaling of new and diversified products. As part of the company’s continuous efforts to review and improve the company’s technologies, the company may either develop such capabilities internally or use third-party service providers who have the ability to deliver technology that is of higher quality, lower cost, or both. Specifically, the company relies on third-parties to help the company delivers systems and operational infrastructure, these relationships include (but are not limited to): Microsoft and Amazon Web Services, Inc. for the company’s cloud infrastructure and Fiserv for credit card processing services. The company is committed to safeguarding its customers’ and its own information and technology, implementing backup and recovery systems, and generally require the same of the company’s third-party service providers. Disaster and Contingency Planning The company operates, either internally or through third-party service providers, multiple data processing centers to store and otherwise process the company’s customer transaction data. The company has a number of safeguards in place that are designed to protect the company from data-related risks and in the event of a disaster, to restore the company’s data centers’ systems. Trademarks The company’s trademarks are Bread, Bread Cashback, Bread Pay, and Bread Savings. The company pursues registration and protection of its trademarks primarily in the United States. Supervision and Regulation The company operates primarily through its insured depository institution subsidiaries, Comenity Bank (CB) and Comenity Capital Bank (CCB), which together are referred to herein as the ‘Banks’. Federal and state laws and regulations extensively regulate the operations of the Banks. This regulatory framework is intended to protect individual consumers, depositors, the Deposit Insurance Fund (DIF) of the Federal Deposit Insurance Corporation (FDIC) and the U.S. banking system as a whole, rather than for the protection of stockholders and creditors. CB is a Delaware-chartered bank operating as a credit card bank under a Competitive Equality Banking Act (CEBA) exemption from the definition of ‘bank’ under the Bank Holding Company Act (BHC Act). CB is subject to prudential regulation, supervision and examination by the Delaware Office of the State Bank Commissioner, as its chartering authority, and the FDIC as its primary federal regulator. CB’s deposits are insured by the DIF of the FDIC up to the applicable deposit insurance limits in accordance with applicable law and FDIC regulations. CCB is a Utah-chartered industrial bank. As an industrial bank, CCB is exempt from the definition of ‘bank’ under the BHC Act. CCB is subject to prudential regulation, supervision and examination by the Utah Department of Financial Institutions, as its chartering authority, and the FDIC as its primary federal regulator. CCB’s deposits are insured by the Deposit Insurance Fund (DIF) of the Federal Deposit Insurance Corporation (FDIC) up to the applicable deposit insurance limits in accordance with applicable law and FDIC regulations. Banks in a multi-bank organization, such as CB and CCB, are subject to supervision and examination by the Consumer Financial Protection Bureau (CFPB) with respect to the federal consumer financial protection laws if at least one bank reports total assets over $10 billion for four consecutive quarters. Further, the CFPB has broad authority to enforce the prohibitions of ‘unfair, deceptive or abusive’ acts or practices regardless of which agency supervises the Banks. The deposits of the Banks are insured up to applicable limits by the DIF of the FDIC. The Banks are also subject to Sections 22(g) and 22(h) of the Federal Reserve Act, and the implementing Regulation O as applied to the Banks. These provisions impose limitations on loans and extensions of credit by the Banks to their executive officers, directors and principal stockholders and their related interests, as well as those of the Banks’ affiliates. Section 619 of the Dodd-Frank Act, commonly known as the Volcker Rule, restricts the ability of banking entities, such as Bread Financial Holdings, Inc. and the Banks, from (i) engaging in proprietary trading and (ii) investing in or sponsoring covered funds, subject to certain limited exceptions. The Dodd-Frank Act requires the Federal Banking Agencies and the Securities and Exchange Commission (SEC) to establish joint regulations or guidelines prohibiting incentive-based payment arrangements at specified regulated entities, including the Banks, that encourage inappropriate risks by providing an executive officer, employee, director or principal stockholder with excessive compensation, fees, or benefits resulting from inappropriate risk taking, as these actions could lead to material financial loss to the entity. The Banks have in place a Bank Secrecy Act and USA PATRIOT Act compliance program and engage in very few transactions of any kind with foreign financial institutions or foreign persons. The FDIC issued final rules and guidelines implementing the provisions of the Fair Credit Reporting Act (FCRA), as amended by the Dodd-Frank Act, that require insured state nonmenber banks, such as the Banks, to establish programs to address risks of identity theft. The Banks each received a CRA rating of ‘Outstanding’ at their most recent Community Reinvestment Act of 1977 (CRA) examinations. The company is subject to the federal consumer financial protection laws implemented by the CFPB. The company is subject to various privacy, information security and data protection laws, including requirements concerning security breach notification. For example, in the United States, the company is subject to the GLBA and implementing regulations and guidance. The company is a covered business under the CCPA, which became effective on January 1, 2020 and under the CPRA which became effective on January 1, 2023. The company is compliant with both the CCPA and the CPRA. History The company was incorporated in 1995. It was formerly known as Alliance Data Systems Corporation and changed its name to Bread Financial Holdings, Inc. in 2022.