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Reserves for Losses | 6 Months Ended
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Jun. 30, 2012
Reserves For Losses Cardmember Receivables And Loans Disclosure [Abstract] |
Reserve for Losses | 4. Reserves for L osses Reserves for losses relating to cardmember loans and receivables represent management's best estimate of the losses inherent in the Company's outstanding portfolio of loans and recei vables. Management's evaluation process requires certain estimates and judgments. Reserves for losses are primarily based upon statistical models that analyze portfolio per formance and reflect management's judgment regarding overall reserve adequacy. The models take into account several factors, including loss migration rates and average losses and recoveries over an appropriate historical period. Management consider s whether to adjust the models for specific factors such as increased risk in certain portfolios, impact of risk management initiatives on portfolio performance and concentration of credit risk based on factors such as vintage, industry or geographic regions. In addition, management may increase or decrease the reserves for losses on cardmember loans for other external envir onmental factors, including various indicators related to employment, spend, sentiment, housing and credit, as well as the legal and regulatory environment. Generally, d ue to the short-term nature of cardmember receivables, the impact of additional external factors on the losses inherent within the cardmember receivable s portfolio is not significant. As part of this evaluation process, management also considers various reserve coverage metrics, such as r eserves as a percentage of past due amounts, reserves as a percentage of cardmember receivables or loans and net write-off coverage. Cardmember loans and r eceivables balances are written-off when management considers amounts to be uncollectible, which is generally determined b y the number of days past due and is typically no later than 180 days. Cardmember loans and r eceivables in bankruptcy or owed by deceased individuals are written off upon notification and r ecoveries are recognized as they are collected. Changes in Cardmember Receivables Reserve for Losses The following table presents changes in the cardmember receivables reserve for losses for the six months ended June 30:
(Millions) |  | 2012 |  | 2011
Balance, January 1 |  | $ | 438 |  | $ | 386
Additions: |  |  |  |  |  |
| Provisions(a) |  |  | 283 |  |  | 279
| Other(b) |  |  | 58 |  |  | 80
|  | Total provision |  |  | 341 |  |  | 359
Deductions: |  |  |  |  |  |
| Net write-offs(c) |  |  | (346) |  |  | (260)
| Other(d) |  |  | (41) |  |  | (70)
Balance, June 30 |  | $ | 392 |  | $ | 415
P rovisions for principal (resulting from authorized transactions) and fee reserve components. Provisions for unauthorized transactions. Consists of principal (resulting from authorized transactions) and fee components, less recoveries of $193 million and $171 million for the six months ended June 30, 2012 and 2011, respectively. Includes net write-offs resulting from unauthorized transactions of $(63) million and $(77) million for the six months ended June 30, 2012 and 2011, respectively; foreign currency translation adjustments of $(2) million and $5 million for the six months ended June 30, 2012 and 2011, respectively; cardmember bankruptcy reserves of $18 million and nil for the six months ended June 30, 2012 and 2011, respectively; and other items of $6 million and $2 million for the six months ended June 30, 2012 and 2011, respectively. Cardmember bankruptcy reserves were classified as other liabilities in prior periods. Cardmember Receivables Evaluated Individually and Collectively for Impairment The following table presents cardmember receivables evaluated individually and collectively for impair ment and related reserves as of June 30, 2012 and December 31, 2011:
(Millions) |  | 2012 |  | 2011
Cardmember receivables evaluated individually for impairment(a) |  | $ | 121 |  | $ | 174
Related reserves (a) |  | $ | 98 |  | $ | 118
Cardmember receivables evaluated collectively for impairment |  | $ | 41,419 |  | $ | 40,716
Related reserves |  | $ | 294 |  | $ | 320
Represents receivables modified in a TDR and related reserves. Refer to the Impaired Loans and Receivables dis cussion in N ote 3 for further information. Changes in Cardmember Loans Reserve for Losses The following table presents changes in the cardmember loans reserve for losses for the six months ended June 30:
(Millions) |  | 2012 |  | 2011
Balance, January 1 |  | $ | 1,874 |  | $ | 3,646
Additions: |  |  |  |  |  |
| Provisions(a) |  |  | 438 |  |  | 7
| Other(b) |  |  | 51 |  |  | 49
|  | Total provision |  |  | 489 |  |  | 56
Deductions: |  |  |  |  |  |
| Net write-offs: |  |  |  |  |  |
|  | Principal(c) |  |  | (678) |  |  | (992)
|  | Interest and fees(c) |  |  | (85) |  |  | (115)
| Other(d) |  |  | (53) |  |  | (35)
Balance, June 30 |  | $ | 1,547 |  | $ | 2,560
P rovisions for principal (resulting from authorized transacti ons), interest and fee reserve s components. P rovisions for unauthorized transactions. Consists of principal write-offs (resulting from authorized transactions), less recoveries of $258 million and $300 million for the six months ended June 30, 2012 and 2011, respectively. Recoveries of inte rest and fees were de minimis. I nclude s net write-offs for unauthorized transactions of $(53) million and $(47) million for the six months ended June 30, 2012 and 2011, respectively; foreign currency translation adjustments of $(1) million and $13 million for the six months ended June 30, 2012 and 2011, respectively; cardmember bankruptcy reserves of $4 million and nil for the six months ended June 30, 2012 and 2011, respectively; and other item s of $(3) million and $(1) million for the six months ended June 30, 2012 and 2011, respectively. Cardmember bankruptcy reserves were classified as othe r liabilities in prior periods. Cardm ember Loans Evaluated Individually and Collectively for Impairment The following table presents cardmember loans evaluated individually and collectively for impairment and related reserves as of June 30, 2012 and December 31, 2011:
(Millions) |  | 2012 |  | 2011
Cardmember loans evaluated individually for impairment(a) |  | $ | 699 |  | $ | 744
Related reserves (a) |  | $ | 165 |  | $ | 176
Cardmember loans evaluated collectively for impairment(b) |  | $ | 60,280 |  | $ | 61,877
Related reserves (b) |  | $ | 1,382 |  | $ | 1,698
Represents loans modified in a TDR and related reserves. Refer to the Impaired Loans and Receivables d iscussion in Note 3 for further information. Represents current loans and loans less than 90 days past due, loans over 90 days past due and accruing interest, and non-accrual loans and related reserves. The reserves include the results of analytical models that are specific to individual pools of loans and reserves for external environmental factors that apply to loans in geographic markets that are collectively evaluated for impairment and are not specific to any individual pool of loans.

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