Accounts Receivable and Loans

12 Months Ended

Dec. 31, 2016

NOTE 3

Loans and Accounts Receivable

The Company’s lending and charge payment card products result in the generation of Card Member loans and Card Member receivables, respectively. This Note is presented excluding amounts associated with the Card Member loans and receivables HFS as of December 31, 2015; the Company did not have any Card Member loans and receivables HFS as of December 31, 2016.

Card Member and Other Loans

Card Member loans are recorded at the time a Card Member enters into a point-of-sale transaction with a merchant and represent revolving amounts due on lending card products, as well as amounts due from charge Card Members who utilize the Pay Over Time features on their account and elect to revolve a portion of the outstanding balance by entering into a revolving payment arrangement with the Company. These loans have a range of terms such as credit limits, interest rates, fees and payment structures, which can be revised over time based on new information about Card Members, and in accordance with applicable regulations and the respective product’s terms and conditions. Card Members holding revolving loans are typically required to make monthly payments based on pre-established amounts and the amounts that Card Members choose to revolve are subject to finance charges.

Card Member loans are presented on the Consolidated Balance Sheets net of reserves for losses (refer to Note 4), and include principal and any related accrued interest and fees. The Company’s policy generally is to cease accruing interest on a Card Member loan at the time the account is written off, and establish reserves for interest that the Company believes will not be collected.

Card Member loans by segment and Other loans as of December 31, 2016 and 2015 consisted of:

(Millions)		2016		2015
U.S. Consumer Services^(a)	$	48,758	$	43,495
International Consumer and Network Services		6,971		7,072
Global Commercial Services		9,536		8,006
Card Member loans		65,265		58,573
Less: Reserve for losses		1,223		1,028
Card Member loans, net	$	64,042	$	57,545
Other loans, net^(b)	$	1,419	$	1,254

Includes approximately $26.1 billion and $23.6 billion of gross Card Member loans available to settle obligations of a consolidated VIE as of December 31, 2016 and 2015, respectively.
Other loans primarily represent commercial financing products. Other loans are presented net of reserves for losses of $42 million and $20 million as of December 31, 2016 and 2015, respectively.

Card Member and Other Receivables

Card Member receivables are also recorded at the time a Card Member enters into a point-of-sale transaction with a merchant and represent amounts due on charge card products. Each charge card transaction is authorized based on its likely economics, a Card Member’s most recent credit information and spend patterns. Additionally, global spend limits are established to limit the maximum exposure for the Company.

Charge Card Members generally must pay the full amount billed each month. Card Member receivable balances are presented on the Consolidated Balance Sheets net of reserves for losses (refer to Note 4), and include principal and any related accrued fees.

Card Member accounts receivable by segment and Other receivables as of December 31, 2016 and 2015 consisted of:

(Millions)	2016		2015
U.S. Consumer Services^(a)	$	12,302	$	11,807
International Consumer and Network Services		5,966		5,599
Global Commercial Services		29,040		26,727
Card Member receivables		47,308		44,133
Less: Reserve for losses		467		462
Card Member receivables, net	$	46,841	$	43,671
Other receivables, net^(b)	$	3,232	$	3,024

Includes $8.9 billion and $6.6 billion of gross Card Member receivables available to settle obligations of a consolidated VIE as of December 31, 2016 and 2015, respectively.
Other receivables primarily represent amounts related to (i) GNS partner banks for items such as royalty and franchise fees, (ii) certain merchants for billed discount revenue, and (iii) loyalty coalition partners for points issued, as well as program participation and servicing fees. Other receivables are presented net of reserves for losses of $45 million and $43 million as of December 31, 2016 and 2015, respectively.

Card Member Loans and Card Member Receivables Aging

Generally, a Card Member account is considered past due if payment is not received within 30 days after the billing statement date. The following table presents the aging of Card Member loans and receivables as of December 31, 2016 and 2015:

2016 (Millions)			Current		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Total
Card Member Loans:
U.S. Consumer Services		$	48,216	$	156	$	119	$	267	$	48,758
International Consumer and Network Services			6,863		32		24		52		6,971
Global Commercial Services
	Global Small Business Services		9,378		34		23		49		9,484
	Global Corporate Payments^(a)		(b)		(b)		(b)		―		52
Card Member Receivables:
U.S. Consumer Services		$	12,158	$	45	$	30	$	69	$	12,302
International Consumer and Network Services			5,888		22		15		41		5,966
Global Commercial Services
	Global Small Business Services		14,047		77		47		102		14,273
	Global Corporate Payments^(a)		(b)		(b)		(b)		135		14,767

2015 (Millions)			Current		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Total
Card Member Loans:
U.S. Consumer Services		$	43,063	$	128	$	94	$	210	$	43,495
International Consumer and Network Services			6,961		34		25		52		7,072
Global Commercial Services
	Global Small Business Services		7,867		26		18		40		7,951
	Global Corporate Payments^(a)		(b)		(b)		(b)		1		55
Card Member Receivables:
U.S. Consumer Services		$	11,646	$	54	$	32	$	75	$	11,807
International Consumer and Network Services			5,515		24		18		42		5,599
Global Commercial Services
	Global Small Business Services		12,734		69		45		102		12,950
	Global Corporate Payments^(a)		(b)		(b)		(b)		124		13,777

For Global Corporate Payments (GCP) Card Member loans and receivables in GCS, delinquency data is tracked based on days past billing status rather than days past due. A Card Member account is considered 90 days past billing if payment has not been received within 90 days of the Card Member’s billing statement date. In addition, if the Company initiates collection procedures on an account prior to the account becoming 90 days past billing, the associated Card Member loan and receivable balance is classified as 90 days past billing. These amounts are shown above as 90+ Days Past Due for presentation purposes.
Delinquency data for periods other than 90 days past billing is not available due to system constraints. Therefore, such data has not been utilized for risk management purposes. The balances that are current to 89 days past due can be derived as the difference between the Total and the 90+ Days Past Due balances.

Credit Quality Indicators for Card Member Loans and Receivables

The following tables present the key credit quality indicators as of or for the years ended December 31:

	2016						2015
	Net Write-Off Rate						Net Write-Off Rate
	PrincipalOnly	^(a)	Principal, Interest, & Fees	^(a)	30+Days Past Due as a % ofTotal		Principal Only	^(a)	Principal, Interest, & Fees	^(a)	30+Days Past Due as a % ofTotal
Card Member Loans:
U.S. Consumer Services	1.5	%	1.8	%	1.1	%	1.4	%	1.6	%	1.0	%
International Consumer and Network Services	2.0	%	2.5	%	1.6	%	1.9	%	2.4	%	1.6	%
Global Small Business Services	1.4	%	1.7	%	1.1	%	1.3	%	1.5	%	1.1	%
Card Member Receivables:
U.S. Consumer Services	1.4	%	1.6	%	1.2	%	1.6	%	1.8	%	1.4	%
International Consumer and Network Services	2.0	%	2.2	%	1.3	%	2.1	%	2.3	%	1.5	%
Global Small Business Services	1.5	%	1.7	%	1.6	%	1.8	%	2.1	%	1.7	%

					2016				2015
					Net LossRatio asa % ofChargeVolume		90+Days Past Billing as a % of Receivables		Net Loss Ratio as a % of Charge Volume		90+ Days Past Billing as a % of Receivables
Card Member Receivables:
Global Corporate Payments					0.09	%	0.9	%	0.09	%	0.9	%

The Company presents a net write-off rate based on principal losses only (i.e., excluding interest and/or fees) to be consistent with industry convention. In addition, because the Company considers uncollectible interest and/or fees in estimating its reserves for credit losses, a net write-off rate including principal, interest and/or fees is also presented. The year ended December 31, 2015, reflects the impact of a change in the timing of charge-offs for Card Member loans and receivables in certain modification programs from 180 days past due to 120 days past due, which was fully recognized during the three months ended March 31, 2015.

Refer to Note 4 for additional indicators, including external environmental qualitative factors, management considers in its monthly evaluation process for reserves for losses.

Impaired Card Member Loans and Receivables

Impaired Card Member loans and receivables are individual larger balance or homogeneous pools of smaller balance loans and receivables for which it is probable that the Company will be unable to collect all amounts due according to the original contractual terms of the Card Member agreement. The Company considers impaired loans and receivables to include: (i) loans over 90 days past due still accruing interest, (ii) nonaccrual loans and (iii) loans and receivables modified as troubled debt restructurings (TDRs).

In instances where the Card Member is experiencing financial difficulty, the Company may modify, through various programs, Card Member loans and receivables in order to minimize losses and improve collectability, while providing Card Members with temporary or permanent financial relief. The Company has classified Card Member loans and receivables in these modification programs as TDRs. Beginning January 1, 2015, on a prospective basis the Company continues to classify Card Member accounts that have exited a modification program as a TDR, with such accounts identified as “Out of Program TDRs.”

Such modifications to the loans and receivables primarily include (i) temporary interest rate reductions (possibly as low as zero percent, in which case the loan is characterized as non-accrual in the Company’s TDR disclosures), (ii) placing the Card Member on a fixed payment plan not to exceed 60 months and (iii) suspending delinquency fees until the Card Member exits the modification program. Upon entering the modification program, the Card Member’s ability to make future purchases is either cancelled, or in certain cases suspended until the Card Member successfully exits the modification program. In accordance with the modification agreement with the Card Member, loans may revert back to the original contractual terms (including the contractual interest rate) when the Card Member exits the modification program, which is (i) when all payments have been made in accordance with the modification agreement or, (ii) when the Card Member defaults out of the modification program. The Company establishes a reserve for Card Member interest charges and fees considered to be uncollectible.

Reserves for Card Member loans and receivables modified as TDRs are determined as the difference between the cash flows expected to be received from the Card Member (taking into consideration the probability of subsequent defaults), discounted at the original effective interest rates, and the carrying value of the related Card Member loan or receivable balance. The Company determines the original effective interest rate as the interest rate in effect prior to the imposition of any penalty interest rate. All changes in the impairment measurement are included in Provisions for losses in the Consolidated Statements of Income.

The following tables provide additional information with respect to the Company’s impaired Card Member loans and receivables. Impaired Card Member receivables are not significant for ICNS as of December 31, 2016, 2015 and 2014; therefore, this segment’s receivables are not included in the following tables.

	As of December 31, 2016
							Accounts Classified as a TDR ^(c)
(Millions)	Over 90 days Past Due & Accruing Interest		^(a)	Non-Accruals		^(b)	In Program		^(d)	Out of Program		^(e)	Total Impaired Balance		Unpaid Principal Balance		Allowance for TDRs
Card Member Loans:
U.S. Consumer Services	$	178		$	139		$	165		$	129		$	611	$	558	$	51
International Consumer and Network Services		52			―			―			―			52		51		―
Global Commercial Services		30			30			26			26			112		103		9
Card Member Receivables:
U.S. Consumer Services		―			―			11			6			17		17		7
Global Commercial Services		―			―			28			10			38		38		21
Total	$	260		$	169		$	230		$	171		$	830	$	767	$	88

	As of December 31, 2015
							Accounts Classified as a TDR ^(c)
(Millions)	Over 90 days Past Due & Accruing Interest		^(a)	Non-Accruals		^(b)	In Program		^(d)	Out of Program		^(e)	Total Impaired Balance		UnpaidPrincipalBalance		Allowance for TDRs
Card Member Loans:
U.S. Consumer Services	$	140		$	124		$	149		$	89		$	502	$	463	$	44
International Consumer and Network Services		52			―			―			―			52		51		―
Global Commercial Services		24			26			23			18			91		85		9
Card Member Receivables:
U.S. Consumer Services		―			―			11			3			14		14		8
Global Commercial Services		―			―			16			3			19		19		12
Total	$	216		$	150		$	199		$	113		$	678	$	632	$	73

	As of December 31, 2014
(Millions)	Over 90 days Past Due & Accruing Interest		^(a)	Non-Accruals		^(b)	In Program TDRs		^(c)(d)	Total Impaired Balance			Unpaid Principal Balance		Allowance for TDRs
Card Member Loans:
U.S. Consumer Services	$	137		$	204		$	245		$	586		$	551	$	57
International Consumer and Network Services		57			―			―			57			56		―
Global Commercial Services		24			37			41			102			95		10
Card Member Receivables:
U.S. Consumer Services		―			―			17			17			17		13
Global Commercial Services		―			―			31			31			31		22
Total	$	218		$	241		$	334		$	793		$	750	$	102

The Company’s policy is generally to accrue interest through the date of write-off (typically 180 days past due). The Company establishes reserves for interest that it believes will not be collected. Amounts presented exclude Card Member loans classified as a TDR.
Non-accrual loans not in modification programs primarily include certain Card Member loans placed with outside collection agencies for which the Company has ceased accruing interest. Amounts presented exclude Card Member loans classified as a TDR.
Accounts classified as a TDR include $20 million, $20 million and $26 million that are over 90 days past due and accruing interest and $11 million, $18 million and $34 million that are non-accruals as of December 31, 2016, 2015 and 2014, respectively.
In Program TDRs include Card Member accounts that are currently enrolled in a modification program.
Out of Program TDRs include $132 million and $84 million of Card Member accounts that have successfully completed a modification program and $39 million and $29 million of Card Member accounts that were not in compliance with the terms of the modification programs as of December 31, 2016 and 2015, respectively.

The following table provides information with respect to the Company’s average balances of, and interest income recognized from, impaired Card Member loans and the average balances of impaired Card Member receivables for the years ended December 31:

2016 (Millions)		Average Balance	Interest Income Recognized
Card Member Loans:
U.S. Consumer Services	$	559	$	53
International Consumer and Network Services		53		15
Global Commercial Services		103		13
Card Member Receivables:
U.S. Consumer Services		14		―
Global Commercial Services		28		―
Total	$	757	$	81

			Interest Income
2015 (Millions)		Average Balance	Recognized
Card Member Loans:
U.S. Consumer Services	$	569	$	48
International Consumer and Network Services		54		14
Global Commercial Services		104		11
Card Member Receivables:
U.S. Consumer Services		13		―
Global Commercial Services		20		―
Total	$	760	$	73

			Interest Income
2014 (Millions)		Average Balance	Recognized
Card Member Loans:
U.S. Consumer Services	$	633	$	39
International Consumer and Network Services		62		16
Global Commercial Services		117		10
Card Member Receivables:
U.S. Consumer Services		19		―
Global Commercial Services		28		―
Total	$	859	$	65

Card Member Loans and Receivables Modified as TDRs

The following table provides additional information with respect to the USCS and GCS Card Member loans and receivables modified as TDRs for the years ended December 31, 2016, 2015 and 2014. The ICNS Card Member loans and receivables modifications were not significant; therefore, this segment is not included in the following TDR disclosures.

2016		Number of Accounts (in thousands)		Outstanding Balances ($ in millions) ^(a)	Average Interest Rate Reduction (% points)	Average Payment Term Extensions (# of months)
Troubled Debt Restructurings:
	Card Member Loans	31	$	220	9	(b)
	Card Member Receivables	9		123	(c)	18
Total		40	$	343

2015		Number of Accounts (in thousands)		Outstanding Balances ($ in millions) ^(a)	Average Interest Rate Reduction (% points)	Average Payment Term Extensions (# of months)
Troubled Debt Restructurings:
	Card Member Loans	40	$	285	9	(b)
	Card Member Receivables	12		147	(c)	12
Total		52	$	432

2014		Number of Accounts (in thousands)		Outstanding Balances ($ in millions) ^(a)	Average Interest Rate Reduction (% points)	Average Payment Term Extensions (# of months)
Troubled Debt Restructurings:
	Card Member Loans	46	$	342	10	(b)
	Card Member Receivables	15		176	(c)	12
Total		61	$	518

Represents the outstanding balance immediately prior to modification. The outstanding balance includes principal, fees and accrued interest on Card Member loans and principal and fees on Card Member receivables. Modifications did not reduce the principle balance.
For Card Member loans, there have been no payment term extensions.
The Company does not offer interest rate reduction programs for Card Member receivables as the receivables are non-interest bearing.

The following table provides information with respect to the USCS and GCS Card Member loans and receivables modified as TDRs that subsequently defaulted within 12 months of modification for the years ended December 31, 2016, 2015 and 2014. A Card Member is considered in default of a modification program after one and up to two consecutive missed payments, depending on the terms of the modification program. For all Card Members that defaulted from a modification program, the probability of default is factored into the reserves for Card Member loans and receivables.

		Number of Accounts		Aggregated Outstanding Balances Upon Default^(a)
2016			(thousands)	(millions)
Troubled Debt Restructurings That Subsequently Defaulted:
	Card Member Loans		7	$	41
	Card Member Receivables		3		4
Total			10	$	45

		Number of Accounts		Aggregated Outstanding Balances Upon Default^(a)
2015			(thousands)	(millions)
Troubled Debt Restructurings That Subsequently Defaulted:
	Card Member Loans		8	$	52
	Card Member Receivables		3		5
Total			11	$	57

		Number of Accounts		Aggregated Outstanding Balances Upon Default^(a)
2014^(b)			(thousands)	(millions)
Troubled Debt Restructurings That Subsequently Defaulted:
	Card Member Loans		8	$	52
	Card Member Receivables		3		12
Total			11	$	64

The outstanding balances upon default include principal, fees and accrued interest on Card Member loans, and principal and fees on Card Member receivables.
The number of accounts and outstanding balances upon default have been revised to reflect the exclusion of written off accounts, which are not material.