What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2024-02-20 compared with 2023-02-28 · 216 added, 183 removed, 306 unchanged (57% of the section changed)

1 unchanged sentence

We create opportunities for our 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, we deliver growth for our partners through a comprehensive product suite, including private label and co-brand credit cards and buy now, pay later products such as installment loans and our “split-pay” offerings.

Driven by a digital-first approach, data insights and white-label technology, we deliver growth for our 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 our “split-pay” offerings.

We also offer direct-to-consumer solutions that give customers more access, choice and freedom through our branded Bread Cashback TM American Express ® Credit Card and Bread Savings TM products.

Our partner base consists of large consumer-based businesses, including well-known brands such as (alphabetically) AAA, Academy Sports + Outdoors, Caesars, Michaels, the NFL, Signet, Ulta and Victoria’s Secret, as well as small- and medium-sized businesses (SMBs).

Our partner base is also well diversified across a broad range of industries, including specialty apparel, sporting goods, health and beauty, jewelry, home goods and travel and entertainment.

We believe our comprehensive suite of payment, lending and saving solutions, along with our related marketing and data and analytics, offers us a significant competitive advantage with products relevant across customer segments (Gen Z, Millennial, Gen X and Baby Boomers).

Our partner base consists of large consumer-based businesses, including well-known brands such as (alphabetically) AAA, Academy Sports + Outdoors, Caesars, Dell Technologies, the NFL, Signet, Ulta and Victoria’s Secret, as well as small- and medium-sized businesses (SMBs).

Our 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 we first began, specialty apparel.

We believe our comprehensive suite of payment, lending and saving solutions, along with our related marketing and data and analytics, offers us a significant competitive advantage with products relevant across all customer segments (Gen Z, Millennial, Gen X and Baby Boomers).

The breadth and quality of our product and service offerings have enabled us to establish and maintain long-standing partner relationships.

On November 5, 2021, we completed the spinoff of our former LoyaltyOne ® segment, consisting of the Canadian AIR MILES ® Reward Program and Netherlands-based BrandLoyalty businesses, into an independent, publicly traded company, Loyalty Ventures Inc.

(LVI), which is listed on Nasdaq under the symbol “LYLT”.

The spinoff was completed through the pro rata distribution of 81% of the outstanding shares of LVI common stock to holders of our common stock at the close of business on the record date of October 27, 2021, with Bread Financial Holdings, Inc.

retaining the remaining 19% of the outstanding shares of LVI common stock.

Our stockholders of record received one share of LVI common stock for every two and one-half shares of Bread Financial Holdings, Inc.

common stock held on the record date.

Unless otherwise noted, all discussion below, including amounts and percentages for all periods, reflect the results of operations and financial condition of Bread Financial Holdings, Inc.’s continuing operations.

As such, the LoyaltyOne segment, which was classified as discontinued operations as of November 5, 2021, has been excluded from all presentations below, unless otherwise noted.

Prior to the spinoff of the LoyaltyOne segment, we had two reportable operating segments (Card Services and LoyaltyOne).

We now operate as a single segment that includes all of our continuing operations.

Business Strategy & Transformation

Beginning in 2018, our Board of Directors undertook a series of strategic initiatives based on an evaluation of the portfolio of businesses that constituted our company at that time.

Subsequently, we completed the sale of our former Epsilon business in July 2019, the sale of our Precima ® business in January 2020, and the spinoff of our LoyaltyOne segment in November 2021.

Through these transactions and other initiatives, we have simplified our business model as a leading tech-forward financial services company providing payment, lending and saving solutions, while also reducing debt and improving leverage and capital ratios.

As we have transformed the business, we have made strategic investments in assets with the highest growth potential, focused on expanding our product suite and direct-to-consumer offerings, diversifying our customer base, developing key strategic relationships, enhancing our core technology, and digital capabilities, and increasing our emphasis on environmental, social and governance (ESG) initiatives.

Below is a timeline of key milestones in our business transformation since 2020:

Tabl e of Contents

We continue to make strategic investments in technology, people, data management tools and digital capabilities to further improve our competitive position and drive future growth.

These investments further our objective to grow sales through the origination of credit card and other loans, making it easier for consumers to finance purchases and make payments wherever they occur— online, in store and in-app.

By offering consumer choice, we provide relevant products across consumer segments, including Gen Z and Millennials who we believe are more likely to be drawn to cash flow management products such as installment lending and split-pay, while Gen X and Baby Boomers generally gravitate towards rewards and the convenience of a private label or co-brand card.

With our broad suite of products, including private label and co-brand credit cards, installment lending and split-pay, together with digital, analytical and servicing capabilities to support those products, we drive incremental sales for our partners’ businesses.

We also intend to continue rebalancing our portfolio, prioritizing and investing in profitable, strong performing partners, targeting core and new industries, and becoming a more cost-efficient provider of financial products and services.

In addition, we continue to expand our direct-to-consumer lending and payment products for new and existing customers, including our proprietary credit cards (Bread Cashback TM ) for growth and value retention.

As reflected below, during 2022 we continued to diversify both our product offerings and the industries in which our partners operate, which we believe will allow us to balance growth and expand the addressable market:

We operate our business through a single reportable segment, with our primary source of revenue being from Interest and fees on loans from our various credit card and other loan products, and to a lesser extent from contractual relationships with our brand partners.

We continue to make strategic investments in digital and technology, including cloud capabilities, emerging technologies and automation, and data and analytics, all the while enhancing our governance and control over the availability, quality and security of our data.

These strategic investments are in addition to ongoing investments in support of delivering world class customer experiences across all channels and investing in the talent needed to improve our competitive position and drive ongoing responsible growth.

We believe that our digital and technology investments have and will continue to promote new account originations, brand and customer engagement, improved customer experience and operating efficiencies, making it easier for customers to finance purchases and make payments wherever they occur— online, in store and in-app.

With our range of offerings, we provide relevant products across consumer segments, including Gen Z and Millennials who we believe 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, we continue to develop and scale our direct-to-consumer lending and payment products for new and existing customers, including through our proprietary credit cards and Bread Savings TM products.

We also continue to diversify and optimize our portfolio, prioritizing our investment in strong and profitable partners, industries and affinity brands, while also continuing to develop our Bread Pay TM products and exploring various strategic business opportunities adjacent to our core private label and co-brand credit card business (business adjacencies) in an evolving payments, macroeconomic and regulatory environment.

We proactively manage our credit risk to strengthen our balance sheet and ensure we are appropriately compensated for the risks we take.

We closely monitor our projected returns with the goal of generating risk adjusted margins above our peers.

Since 2020 (when our current Chief Executive Officer joined the Company), we have reduced our Parent Company debt levels by approximately $1.7 billion as of December 31, 2023;

refinanced and extended our near-term debt maturities;

significantly strengthened our capital levels and balance sheet;

diversified our funding mix;

and diversified our product mix through growth of our co-brand credit card programs, the introduction of new proprietary cards and the launch of Bread Pay TM product offerings.

Below are our guiding principles and steps we have taken that we believe have improved our financial strength and resiliency and positioned us for long-term success:

Tabl e of Contents

2 unchanged sentences

(i) private label and co-brand credit card programs with retailers and other brand partners;

(ii) Bread Cashback TM products;

(ii) direct-to-consumer credit cards (DTC or retail);

(iii) Bread Pay TM products;

2 unchanged sentences

Private Label and Co-Brand Credit Card Lending

Our core business, historically, has been to assist many of the country’s best-known brands and retailers in driving sales and loyalty through their private label and co-brand credit card programs.

In these programs, we (through our Banks) are the credit card issuer and lender to our partner’s customers, and we also service the loans and provide a variety of other related services, which are described in more detail below.

Our partner base, with approximately 100 brands and numerous online merchants, consists of many large consumer-based businesses, including well-known brands such as (alphabetically) AAA, Academy Sports + Outdoors, Caesars, Michaels, the NFL, Signet, Ulta and Victoria’s Secret.

Our partners benefit from customer insights and analytics, with each of our credit card branded programs tailored to our partner’s brand and their unique customers.

Specifically, private label credit cards are partner-branded credit cards that are used exclusively for the purchase of goods and services from that particular partner.

Credit under a private label credit card typically is extended either on standard terms only, which means accounts are assessed periodic interest charges using an agreed non-promotional fixed and/or variable interest rate, or pursuant to a promotional financing offer, involving deferred interest, reduced interest or no interest during a set promotional period (typically between six and 60 months).

We receive a merchant discount from our partners to compensate us for all or part of the foregone interest income associated with promotional financing.

The terms of these promotions vary by partner, but generally the longer the deferred interest, reduced interest or interest-free period, the greater the partner’s merchant discount.

Some offers permit customers to pay for a purchase in equal monthly payments with no interest or at a reduced interest rate, rather than deferring or delaying interest charges.

We typically do not charge interchange or other fees to our partners when a customer uses a private label credit card to purchase our partners’ goods and services through our payment system.

Our core business, historically, has been working with many of the country’s best-known brands and retailers (who we call our partners or brand partners) to drive sales and loyalty through their private label and co-brand credit card programs.

In these programs, we (through our Banks) are the credit card issuer and lender to our partners’ customers, and we also service the loans and provide a variety of other related services, which are described in more detail below.

Our 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 (alphabetically) AAA, Academy Sports + Outdoors, Caesars, Dell Technologies, the NFL, Signet, Ulta and Victoria’s Secret.

Our partners benefit from customer insights and analytics, with each of our branded credit card programs tailored to our partner’s brand and their unique customers.

Our private label and co-brand program agreements with our brand partners are generally long-term, exclusive contracts, with terms typically ranging from 5 to 10 years.

As of December 31, 2023, our top five partner contracts (based on end-of-period loan balances) are secured through 2028, and more than 85% of our loan portfolio is secured through 2025.

Private label credit cards are partner-branded credit cards used by consumers exclusively for the purchase of goods and services from that particular partner.

Credit under a private label credit card typically is extended either on standard terms, which means accounts are assessed periodic interest charges using an agreed non-promotional fixed and/or variable interest rate, or pursuant to a promotional financing offer, involving deferred interest, reduced interest or no interest during a set promotional period (typically between six and 60 months).

We typically do not charge interchange or other fees to our partners when customers use private label credit cards to purchase our partners’ goods and services through our payment system.

Our private label credit card loan balances are typically smaller, with an average customer balance of approximately $700;

although, we offer “big ticket” financing with certain private label brand partners, which often involves larger amounts.

Relative to our co-brand loan portfolio, our private label loan portfolio generally has higher revenue yields, and customers with lower credit lines and lower credit scores.

although, we do offer “big ticket” financing and financing for medical and dental procedures with certain private label brand partners, which often involves larger amounts.

Relative to our co-brand loan portfolio, our private label loan portfolio generally has higher revenue yields, and our private label customers generally have lower credit lines and lower credit scores.

As well, our private label credit card customers are generally more likely to be delinquent in their payments, have accounts with higher APRs and have more late fees assessed.

Tabl e of Contents

Our 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.

We currently issue co-brand credit cards for use on the MasterCard and Visa networks.

Credit extended under our co-branded credit cards typically is extended on standard terms only.

Charges made using a co-branded credit card, particularly charges made outside of that co-brand partner, generate interchange income for us.

Relative to our private label loan portfolio, our co-brand loan portfolio generally has lower revenue yields, and customers with higher credit lines and higher credit scores (with the majority of our co-brand customers having a Vantage score in excess of 660).

Credit extended under our co-brand credit cards typically is extended on standard terms only.

Charges made using a co-brand credit card, particularly charges made outside of that co-brand partner, generate interchange income for us.

Relative to our private label loan portfolio, our co-brand loan portfolio generally has lower revenue yields, and our co-brand customers generally have higher credit lines and higher credit scores, with the majority of our co-brand customers having a Vantage score in excess of 660.

For the year ended December 31, 2023, customer spending on our co-brand credit cards comprised approximately 50% of our credit sales (as compared to 37% for the year ended December 31, 2019, the last fiscal year prior to our current Chief Executive Officer joining the Company), which we believe enables us to capture incremental and non-discretionary sales as consumer spending patterns shift in response to evolving economic conditions.

In both our private label and co-brand partner relationships, we receive a merchant discount fee from our partners to compensate us for all or part of the foregone interest income associated with promotional financing.

The terms of these promotions vary by partner, but generally the longer the deferred interest, reduced interest or interest-free period, the greater the partner’s merchant discount.

Some offers permit customers to pay for a purchase in equal monthly payments with no interest or at a reduced interest rate, rather than deferring or delaying interest charges.

Our credit card program agreements typically provide for royalty payments, or retailer share arrangements, to our brand partners based on purchased volume or if certain contractual incentives are met, such as if the economic performance of the program exceeds a contractually defined threshold, or for payments for new accounts.

These amounts are recorded as a reduction of revenue in the period incurred.

In addition to the retailer share arrangements, our program agreements typically provide that the parties will develop a marketing plan to support the program, along with the terms by which a joint marketing budget is funded.

Marketing costs for which we are responsible under the plan are expensed as incurred.

Our program agreements also typically provide that the parties will develop the terms of the rewards program linked to the use of our product (such as opportunities to receive double rewards points for purchases made on a product), along with the allocation of costs related to the rewards program.

More broadly, the credit card programs we operate typically provide reward points, which are redeemable for a variety of products or awards, or merchandise discounts earned by the customer having achieved a pre-set spending level.

Other programs may include cash back rewards or statement credits.

The rewards can be mailed to the cardholder, accessed digitally or may be immediately redeemable at the partner’s retail location.

Costs of cardholder reward arrangements are recognized when the rewards are earned by the cardholders and are generally recorded as a reduction of revenue.

As a general matter, the financial terms and conditions governing our private label and co-brand credit card products vary by program and product type and change over time, although we seek to standardize the non-financial provisions consistently across all products.

The terms and conditions of all of our credit card products are governed by a cardholder agreement and applicable laws and regulations.

We assign each card account a credit limit when the account is initially opened.

We assign each card account a credit limit when the account is initially opened by the customer.

Thereafter, we may increase or decrease individual credit limits from time to time, at our sole discretion, based primarily on our evaluation of the customer’s creditworthiness and ability to pay.

For the vast majority of accounts, periodic interest charges are calculated using the daily balance method, which results in daily compounding of periodic interest charges.

Cash advances are not subject to a grace period, and some credit card programs do not provide a grace period for promotional purchases.

Cash advances are not subject to an interest grace period, and some credit card programs do not provide an interest grace period for promotional purchases.

In addition to periodic interest charges, we may impose other charges and fees on credit card accounts, including, as applicable and provided in the cardholder agreement, late fees where a customer has not paid at least the minimum payment due by the required due date.

Typically, each customer with an outstanding amount due on his or her credit card account must make a minimum payment each month.

Typically, each customer with an outstanding amount due on their credit card account must make a minimum payment each month;

a customer may pay the total amount due at any time without penalty.

We also may enter into arrangements with delinquent customers to extend or otherwise change payment schedules and to waive interest charges and/or fees;

To help further the ease with which customers can make payments, we offer automatic payment functionality on all cardholder accounts.

we do not offer programs involving the forgiveness of principal.

We make it easier for customers to make payments by offering recurring automatic payment functionality on all cardholder accounts and other electronic payments methods.

As of December 31, 2023 we had $17.9 billion in principal on credit card loans from approximately 39 million active accounts, with an average balance for the year ended December 31, 2023 of approximately $900 for accounts with outstanding balances.

Direct-to-Consumer Credit Cards

In the second quarter of 2022, we launched our branded Bread Cashback TM credit card, which is a DTC, general purpose cashback credit card, and is an important product for us to capture incremental, non-discretionary spend and build and retain customer relationships.

As a DTC product, our Bread Cashback TM credit card and other proprietary cards we may issue are not dependent upon the performance of our brand partners or impacted by any partner revenue-sharing obligations.

We believe that our Bread Cashback TM credit card will continue to increase our total addressable market,

Tabl e of Contents

Bread Cashback TM

In April 2022, we launched our branded Bread Cashback TM American Express ® Credit Card, which is a direct-to-consumer, general purpose cashback credit card.

This open-network card is an important new product for us to capture incremental spend and build and retain customer relationships.

We anticipate the Bread Cashback TM American Express ® Credit Card will increase our total addressable market, including the Millennial and Gen Z populations.

The Bread Cashback TM American Express ® Credit Card offers unlimited 2% cashback, no annual fee, no foreign transaction fees, premium protection benefits, American Express ® lifestyle benefits and instant mobile acquisition and wallet provisioning.

Prior to launching our new Bread Cashback TM American Express ® Credit Card, since 2020 we have offered our Comenity-branded general purpose cash-back credit card.

Bread Pay TM is our pay-over-time payment technology solution, which includes both our installment loan and “split-pay” offerings, as described in more detail below.

Through Bread Pay TM , we offer an omnichannel solution for over 700 SMB retailers and merchants, and platform capabilities to bank partners.

The Bread Pay TM offerings and on-boarding capabilities enhance the growth prospects of our industries and increase the addressable market of SMBs.

Bread Pay TM also offers our 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).

As part of our Bread Pay TM products, we offer 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.

As Bread Pay TM has grown, it has expanded our ability to leverage our digital offerings to build both strategic technology platform partnerships and more traditional brand partnership sales and loans.

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, we introduced our newest DTC general purpose credit card, the Bread Rewards TM American Express ® Credit Card, and successfully converted approximately 570,000 existing cardholders from our legacy Comenity-branded general purpose cash-back credit card to this new card.

We expect that our Bread Rewards TM 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.

We currently issue our DTC credit cards on the American Express ® network.

Bread Pay TM is our BNPL payment technology solution, which includes both our installment loan and “split-pay” offerings, as described in more detail below.

Through Bread Pay TM , we offer an omnichannel solution for more than 1,100 SMB retailers and merchants, and we continue to explore and pursue growth opportunities in various business adjacencies, including through the integration of our suite of products (primarily Bread Pay TM installment loans) into third-party platforms to gain efficient distribution of our lending solutions.

We believe the expansion of our Bread Pay TM products is an attractive growth opportunity for us due to, in part, the Bread Pay TM loan portfolio not generally having exposure to potential regulatory actions placing limits on credit card late fees.

Our Bread Pay TM offerings and on-boarding capabilities enhance our growth prospects across the industries in which we lend and increase the addressable market of our Bread Pay TM partners.

We offer 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, we migrated our Bread Pay TM partners from our legacy platform to our new Bread Pay TM 2.0 platform.

Our Bread Pay TM 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.

4 unchanged sentences

The terms of our split-pay loans are governed by customer agreements and applicable laws and regulations.

We do not currently impose charges or fees on these split-pay loan accounts, such as late fees where a customer has not made the required payment by the required due date or returned payment fees.

We have also been working to grow revenue generated through various Bread Pay TM strategic partnerships.

For example, since 2021 we have licensed our payments technology platform on a white-label basis to RBC (NYSE:RY), a premier global financial services provider.

RBC uses our platform to operate its PayPlan by RBC solution, which allows Canadian customers to pay for big-ticket items over time.

We do not originate the loans made through PayPlan, but instead earn transaction and servicing fees.

We are also working to expand our partnership with Sezzle (ASX:SZL), which we announced in October 2021.

We offer our installment or other loan products through Sezzle’s merchant network.

We do not currently impose charges or fees on these split-pay loan accounts either, whether that be late fees or returned payment fees.

Bread Savings TM

Bread Savings TM refers to our direct-to-consumer, or retail, deposit products, primarily in the form of certificates of deposit and savings accounts.

Our Bread Savings TM products support loan growth and improve our funding mix, making us less reliant on our securitization programs and other sources of wholesale funding.

Bread Savings TM refers to our DTC, or retail, deposit products, primarily in the form of certificates of deposit and savings accounts.

Our Bread Savings TM products support loan growth and improve our funding mix, making us less reliant on other sources of wholesale funding.

In recent years, retail deposits have become an increasingly important source of funds for us, growing 18% from $5.5 billion as of December 31, 2022 to $6.5 billion as of December 31, 2023.

As of December 31, 2022, retail deposits represented 26% of our total funding sources.

As of December 31, 2023, retail deposits represented 34% of our total funding sources, and more than 90% of our deposits were estimated to be FDIC-insured (i.e.

below applicable FDIC insurance limits, which are generally $250,000 per depositor, per insured bank), measured based on regulatory guidelines.

Our online Bread Savings TM platform is scalable allowing us to expand without having to rely on a traditional “brick and mortar” branch network.

7 unchanged sentences

(iii) marketing, and data and analytics;

and (iv) our Enhanced Digital Suite.

and (iv) our digital and mobile capabilities.

Risk Management, Account Origination and Funding Services.

1 unchanged sentence

We process 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, utilizing internal algorithms and external credit bureau risk scores.

Credit quality is monitored on a regular and consistent basis, using internal algorithms and external credit bureau risk scores.

This information helps us segment new and existing customers into narrower risk ranges, allowing us to better evaluate individual credit risk.

As macroeconomic conditions have weakened over the last year, we have continued to enhance our credit risk management, including through stronger underwriting resulting from enhanced technology, monitoring, and data, prudent and proactive line management, well-established risk appetite metrics, and we are proactively using our recession readiness playbook.

As of December 31, 2022 we had $20.1 billion in principal loans from approximately 43 million active accounts, with an average balance for the year ended December 31, 2022 of approximately $870 for accounts with outstanding balances.

As macroeconomic conditions have weakened over recent years, we have continued to enhance our 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 we are proactively applying our recession readiness playbook.

Loan Processing and Servicing .

We manage and service the loans we originate for our private label and co-brand credit card programs, as well as our Bread Cashback TM and Bread Pay TM products.

We manage and service the loans we originate for our private label and co-brand credit card programs, as well as our DTC credit cards and Bread Pay TM products.

In 2022, we completed the transition of our credit card processing services to Fiserv, a leading global provider of outsourced payments and financial services technology solutions;

with the transition we expect to improve our speed to market, including the ability to quickly and seamlessly add new products and capabilities that benefit our partners and cardholders.

This transition enables efficient integration of digital technology, while supporting our data and analytics capabilities and improving operational efficiencies.

this transition enables improved speed to market, including the ability to quickly and seamlessly add new products and capabilities that benefit our partners and cardholders.

It has also strengthened our ability to ensure we are operating on a compliant core platform, and enabled efficient integration of digital technology, while supporting our data and analytics capabilities and improving operational efficiencies.

See also “—Technology/Systems” below for additional information regarding our approach toward the systems and technologies that we use in the operation of our business.

Our customer care operations are influenced by our retail heritage and we view every customer touch point as an opportunity to provide an exceptional experience.

Our customer care operations offer omnichannel servicing, including phone, mail, fax, email, text and web.

We provide focused training programs in all areas to achieve the highest possible customer service standards and monitor our performance by conducting surveys with our partners and our customers.

In 2022, for the seventeenth time since 2003, we were certified as a Center of Excellence for the quality of our operations, the most prestigious ranking attainable, by BenchmarkPortal.

Our customer care operations offer omnichannel servicing, including phone, mail, fax, email, text, smartphone application and web.

We provide focused training programs in all areas to achieve the highest possible customer service standards and customer experience, and monitor our performance by conducting surveys with our partners and our customers.

In 2023, for the eighteenth consecutive time, we were certified by BenchmarkPortal as a Center of Excellence for the quality of our operations, the most prestigious customer care industry ranking attainable.

Founded by Purdue University in 1995, BenchmarkPortal is a global leader of best practices for customer care centers.

2 unchanged sentences

Through our integrated marketing services, we design and implement strategies that assist our partners in acquiring, retaining and expanding customer engagement to drive a more loyal, frequent shopper that increases customer lifetime value.

Our programs capture transaction data that we analyze to better understand consumer behavior and use to increase the effectiveness of our partners’ marketing activities.

Our programs capture transaction data that we analyze to better understand consumer behavior, which we use to increase the effectiveness of our partners’ marketing activities.

Through our data and analytics capabilities, including machine learning and artificial intelligence, we focus on data insights that drive actionable strategies and enhance revenue growth and customer retention.

We use 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.

Enhanced Digital Suite .

Through our Enhanced Digital Suite, a group of marketing and credit application features, we help our 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 (SDK) that provides access to our broad suite of products;

Digital and Mobile Capabilities .

We are constantly seeking to improve our digital and mobile capabilities, in order to support and enhance our product offerings, drive growth for our brand partners and improve the customer experience.

We seek to provide a seamless, personalized digital and mobile experience that is responsive to our customers’ evolving expectations, while also providing the data and tools necessary to proactively identify and address future customer needs.

During 2023, we made significant improvements to our digital and mobile capabilities, including API enhancements, enriched software development kits, virtual card commercialization and our new Bread Financial mobile app, which we launched to Bread Cashback TM credit card customers in the fourth quarter of 2023, and will roll out to brand partner customers starting in the first quarter of 2024.

We are continually seeking to enhance customers’ self-service capabilities in our digital channels, which allows customers to address their own needs when and how they want, while also generating efficiencies for us over time by reducing the cost to serve our customers.

In addition, through our Enhanced Digital Suite, a group of marketing and credit application features, we help our brand partners capitalize on online trends by bringing through more qualified applicants, a higher credit sales conversion rate and a higher average purchase value.

Tabl e of Contents

Digital Suite includes a unified software development kit that provides access to our 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 our product offerings, we remain focused on creating an exceptional digital and mobile experience for our customers, which we believe will improve our competitive position and drive future growth.

For additional information relating to our business, business strategy and products and services, see “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations – Year in Review – Business Environment”.

Tabl e of Contents

Management’s Discussion and Analysis of Financial Condition and Results of Operations – Business Environment”.

Technology/Systems

We leverage information and technology to help achieve our business objectives and to develop and deliver products and services that satisfy our brand partners’ and customers’ needs.

A key part of our 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 our customers, and the development of new and diversified products.

We believe the continued development and integration of these systems is an important part of our efforts to reduce costs, improve quality and security, and provide faster, more flexible technology services.

Consequently, we continuously review capabilities and develop or acquire systems, processes and competencies to meet our unique business requirements.

As part of our continuous efforts to review and improve our technologies, we may either develop such capabilities internally or rely on third-party outsourcers who have the ability to deliver technology that is of higher quality, lower cost, or both.

We continue to rely on third-party outsourcers to help us deliver systems and operational infrastructure;

these relationships include (but are not limited to):

As part of our continuous efforts to review and improve our technologies, we 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, we rely on third-parties to help us deliver systems and operational infrastructure, these relationships include (but are not limited to):

Microsoft and Amazon Web Services, Inc.

11 unchanged sentences

Protection of Intellectual Property and Other Proprietary Rights

We rely on a combination of patents, copyright, trade secret and trademark laws, confidentiality procedures, contractual provisions and other similar measures to protect our proprietary information and technology used in our business.

We rely on a combination of patents, copyrights, trade secret and trademark laws, confidentiality procedures, contractual provisions and other similar measures to protect our proprietary information and technology used in our business.

We generally enter into confidentiality or license agreements with our employees, consultants and corporate partners, and generally control access to and distribution of our technology, documentation and other proprietary information.

1 unchanged sentence

We have a number of domestic and foreign patents and pending patent applications.

We pursue registration and protection of our trademarks primarily in the United States, although we also have either registered trademarks or applications pending for certain marks in other countries.

We pursue registration and protection of our trademarks primarily in the United States;

although, we also have either registered trademarks or applications pending for certain marks in other countries.

No individual patent or license is material to us or our business.

Tabl e of Contents

The markets for our products and services are highly competitive, continuously changing, highly innovative, and subject to regulatory scrutiny and oversight.

4 unchanged sentences

The consumer credit and payments industry is highly competitive and we face an increasingly dynamic industry as emerging technologies enter the marketplace.

Tabl e of Contents

In competing to acquire and retain the business of brand partners and customers, our primary competition is with other financial institutions whose marketing focus has been on developing credit card programs with attractive value propositions and consequentially large revolving balances.

These competitors further drive their businesses by cross-selling their other financial products to their cardholders.

We also compete for partners on the basis of a number of factors, including program financial and other terms, underwriting standards and capabilities, marketing expertise, service levels, the breadth of our product and service offerings, digital, technological and integration capabilities, brand recognition and reputation.

Our focus is on retailers and other brand partners that understand the competitive advantage of developing loyal customers.

As a result, we focus on analyzing transaction data we obtain through partner loyalty programs and managing our lending programs, including customer specific transaction data and overall consumer spending patterns, to develop and implement successful marketing strategies for our partners.

We also compete for brand partners on the basis of a number of factors, including program financial and other terms, underwriting standards and capabilities, marketing expertise, service levels, the breadth of our product and service offerings, digital, technological and integration capabilities, brand recognition and reputation.

We focus on retailers and other brand partners that understand the competitive advantage of building a loyal customer base.

We have a long history of effectively analyzing transaction data we obtain through partner loyalty programs and managing our lending programs, including customer specific transaction data and overall consumer spending patterns, to develop and implement successful marketing strategies for our partners.

As a form of payment, our customers have numerous consumer credit and other payment options available to them, and our products compete with cash, checks, electronic bank transfers, debit cards, general purpose credit cards (including Visa, MasterCard, American Express and Discover Card), various forms of consumer installment loans and split-pay products, other private label card brands, prepaid cards, digital wallets and mobile payment solutions, and other tools that simplify and personalize shopping experiences for consumers and merchants.

Among other factors, our products compete with these other forms of payment on the basis of interest rates and fees, credit limits, reward programs and other product features.

As the payments industry continues to evolve, in the future we expect increasing competition with emerging payment technologies from financial technology firms and payment networks.

As the payments industry continues to evolve, in the future we expect increasing competition with emerging payment technologies from fintechs and payment networks.

Moreover, some of our competitors, including new and emerging competitors in the digital and mobile payments space, are not subject to the same regulatory requirements or legislative scrutiny to which we are subject, which could place us at a competitive disadvantage.

10 unchanged sentences

Such statutes, regulations, and policies are subject to ongoing review by Congress, state legislatures, and federal and state regulatory agencies.

A change in any of the statutes, regulations, or regulatory policies applicable to CB and/or CCB, or in the leadership or direction of our regulators, could have a material effect on the operations or financial condition of Bread Financial Holdings, Inc.

Further, the scope of regulation and the intensity of supervision will likely remain high in the current regulatory environment.

Tabl e of Contents

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).

8 unchanged sentences

CB is not a member of the Federal Reserve System.

Tabl e of Contents

CCB is a Utah-chartered industrial bank.

9 unchanged sentences

For example, the CFPB’s rulemaking authority may allow it to change regulations adopted in the past by other regulators including regulations issued under the Truth in Lending Act by the Board of Governors of the Federal Reserve System (Federal Reserve Board).

Most recently, in February 2023, the CFPB published a proposed rule with request for public comment that would:

In February 2023, the CFPB published a proposed rule with request for public comment that would:

(i) decrease the safe harbor dollar amount for credit card late fees to $8 and eliminate a higher safe harbor dollar amount for subsequent late payments;

4 unchanged sentences

Accordingly, the proposed $8 safe harbor amount on late fees (and proposed elimination of the annual inflation-based adjustment thereto) would represent a significant decrease from the current safe harbor amounts.

In addition, the proposed rulemaking seeks comment on whether late fees should be prohibited if the applicable payment is made within 15 days of the due date and whether, as a condition to utilizing the safe harbor, credit card issuers should be required to offer automatic payment options and/or provide certain notifications of upcoming payment due dates.

We are closely monitoring the content and timing of the CFPB’s proposed rulemaking and its impact on our business.

In addition, while not a part of the proposed rule, the CFPB sought comment on whether late fees should be prohibited if the applicable payment is made within 15 days of the due date and whether, as a condition to utilizing the safe harbor, credit card issuers should be required to offer automatic payment options and/or provide certain notifications of upcoming payment due dates.

In anticipation of the CFPB publishing its final rule, we are proactively implementing our plans intended to address the potential changes in regulation, which if left unmitigated would have a significant impact on our business.

We are engaged with our brand partners regarding necessary mitigating actions and expect to implement many of these actions prior to the final rule becoming effective.

Additionally, we continue to strategically diversify our business to be less reliant on late fees with the growth of our co-brand and proprietary products and our improved credit profile.

We expect the rule to be challenged in court.

Additional discussion regarding the CFPB’s proposed rulemaking can be found in “Risk Factors —Legal, Regulatory and Compliance Risks ” and “Management’s Discussion & Analysis — Business Environment” below.

Tabl e of Contents

More generally, the CFPB’s ability to rescind, modify or interpret past regulatory guidance could reduce fee income, increase our compliance costs and litigation exposure.

4 unchanged sentences

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 ( Dodd-Frank Act) authorizes certain state officials to enforce regulations issued by the CFPB and to enforce the Dodd- Frank Act’s general prohibition against unfair, deceptive or abusive practices.

To the extent that states enact requirements that differ from federal standards or courts adopt interpretations of federal consumer laws that differ from those adopted by the FDIC, the Federal Reserve Board and the Office of the Comptroller of the Currently (collectively, the Federal Banking Agencies), we may be required to alter products or services offered in some jurisdictions or cease offering products, which will increase compliance costs and reduce our ability to offer the same products and services to consumers nationwide.

To the extent that states enact requirements that differ from federal standards or courts adopt interpretations of federal consumer laws that differ from those adopted by the FDIC, the Federal Reserve Board and the Office of the Comptroller of the Currency (collectively, the Federal Banking Agencies), we may be required to alter products or services offered in some jurisdictions or cease offering products, which will increase compliance costs and reduce our ability to offer the same products and services to consumers nationwide.

On November 20, 2023, following the consent of the Board of Managers of Comenity Servicing LLC (the Servicer), the FDIC issued a consent order to the Servicer.

The Servicer is not one of our Bank subsidiaries, but is our wholly-owned subsidiary that services substantially all of our loans.

The consent order arose out of the June 2022 transition of our credit card processing services to strategic outsourcing partners and addresses certain shortcomings in the Servicer’s information technology (IT) systems development, project management, business continuity management, cloud operations, and third-party oversight.

The Servicer entered into the consent order for the purpose of resolving these matters without admitting or denying any violations of law or regulation set forth in the order.

The Servicer has taken significant steps to strengthen the organization’s IT governance and address the other issues identified in the consent order, and we are committed to ensuring that all of the requirements of the consent order are met.

The consent order does not contain any monetary penalties or fines.

Regulation of Bread Financial Holdings, Inc.

2 unchanged sentences

If any of our entities became subject to regulation as a BHC, among other things, Bread Financial Holdings, Inc.

and its non-bank subsidiaries would be subject to regulation, supervision and examination by the Federal Reserve Board and our operations would be limited to certain activities that are closely related to banking or financial services in nature.

Tabl e of Contents

and our non-bank subsidiaries would be subject to regulation, supervision and examination by the Federal Reserve Board and our operations would be limited to certain activities that are closely related to banking or financial services in nature.

However, under Section 616 of the Dodd-Frank Act, any company that directly or indirectly controls an insured depository institution is required to serve as a source of financial strength to its subsidiary institution and may not conduct its operations in an unsafe or unsound manner.

1 unchanged sentence

As such a company, this means that Bread Financial Holdings, Inc.

must stand ready to use available resources to provide adequate capital funds to the Banks during periods of financial stress or adversity and should maintain the financial flexibility and capital-raising capacity to obtain additional resources to support the Banks.

This support may be required at times when Bread Financial Holdings, Inc.

3 unchanged sentences

Regulation of the Banks

Federal and state banking laws and regulations govern, among other things, the scope of a bank’s business, the investments a bank may make, the reserves against deposits a bank must maintain, the loans a bank makes and collateral it takes, the activities of a bank with respect to mergers and acquisitions, management practices, and numerous other aspects of its operations.

Regulatory Capital Requirements

2 unchanged sentences

These rules implement the Basel III international regulatory capital standards in the United States, as well as certain provisions of the Dodd-Frank Act.

These quantitative calculations are minimums, and the FDIC may determine that a bank, based on its size, complexity, or risk profile, must maintain a higher level of capital in order to operate in a safe and sound manner.

These quantitative calculations are minimums, and the FDIC may

Tabl e of Contents

determine that a bank, based on our size, complexity, or risk profile, must maintain a higher level of capital in order to operate in a safe and sound manner.

Under the U.S.

Basel III capital rules, the Banks’ assets, exposures, and certain off-balance sheet items are subject to risk weights used to determine an institution’s risk-weighted assets, which then are used to determine the minimum capital that CB and CCB should keep as a reserve to reduce the risk of insolvency.

These risk-weighted assets are used to calculate the following minimum capital ratios for the Banks:

• Common Equity Tier 1 (CET1) Risk-Based Capital Ratio - the ratio of CET1 capital to risk-weighted assets.

CET1 capital primarily includes common stockholders’ equity subject to certain regulatory adjustments and deductions, including goodwill, intangible assets, certain deferred tax assets, and Accumulated Other Comprehensive Income (AOCI).

CET1 capital primarily includes common stockholders’ equity subject to certain regulatory adjustments and deductions, including for goodwill and intangible assets, certain deferred tax assets, and accumulated other comprehensive income or loss.

• Tier 1 Risk-Based Capital Ratio - the ratio of Tier 1 capital to risk-weighted assets.

Tier 1 capital is primarily comprised of CET1 capital, perpetual preferred stock, and certain qualifying capital instruments.

For us, this ratio is the same as the CET1 Risk-Based Capital Ratio because we do not currently have any preferred stock or other qualifying capital instruments that would adjust the ratio.

• Total Risk-Based Capital Ratio - the ratio of total capital, including CET1 capital, Tier 1 capital, and Tier 2 capital, to risk-weighted assets.

2 unchanged sentences

• Tier 1 Leverage Ratio - the ratio of Tier 1 capital to quarterly average assets (net of goodwill, certain other intangible assets, and certain other deductions).

Failure to be well-capitalized or to meet minimum capital requirements could result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a material adverse effect on our operations or financial condition.

Failure to be well-capitalized or to meet minimum capital requirements could also result in restrictions on the Banks’ ability to pay dividends or otherwise distribute capital or to receive regulatory approval of applications.

Basel III capital rules require a minimum CET1 Risk-Based Capital Ratio of 4.5%, a minimum Tier 1 Risk-Based Capital Ratio of 6.0%, and a minimum Total Risk-Based Capital Ratio of 8.0%.

2 unchanged sentences

The Capital Conservation Buffer is calculated as a ratio of CET1 capital to risk-weighted assets, and it essentially increases the required minimum risk-based capital ratios.

As a result, the Banks must maintain a CET1 Risk-Based Capital Ratio of at least 7%, a Tier 1 Risk-Based Capital Ratio of at least 8.5% and a Total Risk-Based Capital Ratio of at least 10.5% to avoid being subject to restrictions on capital distributions and discretionary

Tabl e of Contents

bonus payments to its executive management.

The Tier 1 Leverage Ratio is not impacted by the Capital Conservation Buffer, and a bank may be considered well-capitalized while remaining out of compliance with the Capital Conservation Buffer.

A bank, however, may be considered well-capitalized while remaining out of compliance with the Capital Conservation Buffer.

The Tier 1 Leverage Ratio is not impacted by the Capital Conservation Buffer;

the required minimum Tier 1 Leverage Ratio for all banks and BHCs is 4%.

4 unchanged sentences

• Tier 1 Leverage Ratio of 5.0% or greater.

As of December 31, 2023, the Banks’ regulatory capital ratios were above the well-capitalized standards and met the Capital Conservation Buffer.

2 unchanged sentences

is a legal entity separate and distinct from the Banks.

Declaration and payment of cash dividends depends upon cash dividend payments to Bread Financial Holdings, Inc.

by the Banks, which are our primary source of revenue and cash flow.

Declaration and payment of cash dividends or repurchases of our common stock depends upon cash dividend payments to Bread Financial Holdings, Inc.

Tabl e of Contents

the Banks, which are our primary source of revenue and cash flow.

As state-chartered banks, under Delaware or Utah law, as applicable, the Banks are subject to regulatory restrictions on the payment and amounts of dividends.

2 unchanged sentences

The payment of dividends by the Banks and Bread Financial Holdings, Inc.

may also be affected by other factors, such as the requirement to maintain adequate capital above regulatory requirements.

and any repurchases of our common stock may also be affected by other factors, such as the requirement to maintain adequate capital above regulatory requirements.

The Federal Banking Agencies have indicated that paying dividends that deplete a bank’s capital base to an inadequate level would be an unsafe and unsound banking practice;

19 unchanged sentences

Reserve Requirements

Federal Reserve Board regulations require insured depository institutions to maintain cash reserves against their transaction accounts, primarily interest-bearing and regular checking accounts.

The required cash reserves can be in the form of vault

Tabl e of Contents

cash and, if vault cash does not fully satisfy the required cash reserves, in the form of a balance maintained with Federal Reserve Banks.

Federal Reserve Board regulations require insured depository institutions to maintain cash reserves against their transaction accounts, primarily interest-bearing and regular checking accounts, as well as cardholder credit balances.

The required cash reserves can be in the form of vault cash and, if vault cash does not fully satisfy the required cash reserves, in the form of a balance maintained with Federal Reserve Banks;

we maintain a significant majority of our liquidity portfolio on deposit within the Federal Reserve banking system.

The regulations authorize different ranges of reserve requirement ratios depending on the amount of transaction account balances held.

3 unchanged sentences

Effective March 26, 2020, in response to the COVID-19 pandemic, the reserve requirement ratios on all net transaction accounts were reduced to zero percent, thereby eliminating reserve requirements for all depository institutions.

The annual indexation of the reserve requirement exemption amount and the low reserve tranche for 2021, 2022 and 2023 was required by statute, but did not affect depository institutions’ reserve requirements, which remain at zero.

The annual indexation of the reserve requirement exemption amount and the low reserve tranche for the years 2021-2024 was required by statute, but did not affect depository institutions’ reserve requirements, which remain at zero.

Tabl e of Contents

Federal Deposit Insurance

5 unchanged sentences

Under the Federal Deposit Insurance Act (the FDIA), the FDIC may terminate an institution’s deposit insurance upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe and unsound condition or has violated any applicable law, regulation, order or condition imposed by the FDIC.

Cross Guaranty Provisions

The cross guaranty provisions of the FDIA require each insured depository institution controlled by the same parent company to be financially responsible for the failure or resolution costs of any affiliated insured depository institution.

Generally, the amount of the cross guaranty liability is equal to the estimated loss to the DIF for the resolution of the affiliated institution(s) in default.

The FDIC’s claim under the cross guaranty provision is superior to claims of shareholders of the insured depository institution or its parent company and to most claims arising out of obligations or liabilities owed to affiliates of the institution, but is subordinate to claims of depositors, secured creditors and holders of subordinated debt (other than affiliates) of the commonly controlled insured depository institution.

The FDIC may decline to enforce the cross guaranty provision if it determines that a waiver is in the best interest of the DIF.

Depositor Preference

2 unchanged sentences

Restrictions on Transactions with Affiliates and Insiders

Sections 23A and 23B of the Federal Reserve Act limit the extent to which we can borrow or otherwise obtain credit from, or engage in other covered transactions with either of the Banks, which may have the effect of limiting the extent to which either Bank can finance or otherwise supply funds to us.

Sections 23A and 23B of the Federal Reserve Act limit the extent to which the Parent Company and its non-bank affiliates (including non-bank subsidiaries) can borrow or otherwise obtain credit from, or engage in other covered transactions with either of the Banks, which may have the effect of limiting the extent to which either Bank can finance or otherwise supply funds to the Parent Company or its non-bank affiliates.

“Covered transactions” include loans or extensions of credit, purchases of or investments in securities, purchases of assets, including assets subject to an agreement to repurchase, acceptance of securities as collateral for a loan or extension of credit, or the issuance of a guarantee, acceptance, or letter of credit.

Although the applicable rules do not serve as an outright bar on engaging in covered transactions, they do require that we engage in “covered transactions” with either Bank only on terms and under circumstances that are substantially the same, or at least as favorable to the Bank, as those prevailing at the time for comparable transactions with nonaffiliated companies.

Furthermore, with certain exceptions, each loan or extension of credit by either Bank to us or our non-bank subsidiaries must be secured by collateral with a market value ranging from 100% to 130% of the amount of the loan or extension of credit, depending on the type of collateral.

Covered transactions are subject to quantitative and qualitative limits.

In addition, with certain exceptions, each loan or extension of credit by either Bank to the Parent Company or its non-bank affiliates must be secured by collateral with a market value ranging from 100% to 130% of the amount of the loan or extension of credit, depending on the type of collateral.

Further, all transactions between the Banks and the Parent Company or any non-bank affiliates must be on arm’s length terms and consistent with safe and sound banking practices.

The Banks are also prohibited from purchasing low-quality assets from the Parent Company or any non-bank affiliates.

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.

3 unchanged sentences

Tabl e of Contents

Restrictions on transactions with affiliates and insiders under Federal Reserve Act Sections 23A, 23B, 22(g) and 22(h), as well as the requirements of Regulation O, are monitored for compliance by our internal audit department.

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.

Under the Volcker Rule, the term covered funds is defined as any issuer that would be an investment company under the Investment Company Act but for the exemption in section 3(c)(1) or 3(c)(7) of that Act, which includes collateralized loan obligation securities (CLO) and collateralized debt obligation securities.

There are also several exemptions from the definition of covered funds, including, among other things, loan securitization, joint ventures, certain types of foreign funds, entities issuing asset-backed commercial paper, and registered investment companies.

We do not engage in these restricted activities, including in proprietary trading.

We do not engage in proprietary trading, or invest in or sponsor covered funds.

Incentive Compensation

4 unchanged sentences

Bread Financial Holdings, Inc.

has held its “say-on-pay” vote annually.

has held our “say-on-pay” vote annually.

USA PATRIOT Act

18 unchanged sentences

jurisdiction (including property in the possession or control of U.S.

Blocked assets (e.g., property and bank deposits) cannot be paid out, withdrawn, set off, or transferred in any manner without a

Tabl e of Contents

license from the Office of Foreign Assets Control.

Blocked assets (e.g., property and bank deposits) cannot be paid out, withdrawn, set off, or transferred in any manner without a license from the Office of Foreign Assets Control.

Failure to comply with these sanctions could have serious legal and reputational consequences.

Tabl e of Contents

Identity Theft

The SEC and the Commodity Futures Trading Commission (CFTC) jointly issued final rules and guidelines implementing the provisions of the Fair Credit Reporting Act (FCRA), as amended by the Dodd-Frank Act, which require certain regulated entities to establish programs to address risks of identity theft.

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 rules require financial institutions and creditors to develop and implement a written identity theft prevention program that is designed to detect, prevent, and mitigate identity theft in connection with certain existing accounts or the opening of new accounts.

The rules include guidelines to assist entities in the formulation and maintenance of programs that would satisfy these requirements.

In addition, the rules establish special requirements for any credit and debit card issuers that are subject to the jurisdiction of the SEC or the CFTC to assess the validity of notifications of changes of address under certain circumstances.

In addition, the rules establish special requirements for any credit and debit card issuers that are subject to the jurisdiction of the FDIC to assess the validity of notifications of changes of address under certain circumstances.

The Banks implemented an ID Theft Prevention Program, approved by their Boards of Directors, in compliance with these requirements.

7 unchanged sentences

The Banks each received a CRA rating of “Outstanding” at their most recent CRA examinations.

In October 2023, the Federal Banking Agencies issued a final rule overhauling the process and substantive tests used by the agencies to assess a bank’s record of meeting the credit needs of its community.

In February 2024, industry trade associations filed a lawsuit against the Federal Banking Agencies alleging the agencies exceeded their statutory authority and asking the court to vacate the final rule.

Consumer Protection Regulation and Supervision

11 unchanged sentences

and (iii) requires financial institutions to develop, implement and maintain a written comprehensive information security program containing safeguards that are appropriate to the financial institution’s size and complexity, the nature and scope of the financial institution’s activities, the sensitivity of consumer information processed by the financial institution as well as plans for responding to data security breaches.

In 2018, the State of California enacted the California Consumer Privacy Act (CCPA), which was modified in 2020 through a voter referendum adopting the California Privacy Rights Act (CPRA).

The CCPA/CPRA requires covered businesses to comply with requirements that give consumers the right to know what information is being collected from them and whether such information is sold or disclosed to third parties.

The statute also allows consumers to access, delete, correct, and prevent the sale and sharing of personal information that has been collected by covered businesses in certain circumstances.

The CCPA/CPRA does not apply to personal information collected, processed, sold, or disclosed pursuant to the GLBA or the California Financial Information Privacy Act.

We are a covered business under the CCPA, which

Tabl e of Contents

became effective on January 1, 2020 and under the CPRA which became effective on January 1, 2023.

We are compliant with both the CCPA and the CPRA.

Federal and state laws also require us to respond appropriately to data security breaches.

A final rule issued by the Federal Reserve, OCC, and FDIC, which became effective in May 2022, requires banking organizations to notify their primary federal regulator of significant computer security incidents within 36 hours of determining that such an incident has occurred.

Tabl e of Contents

In 2018, the State of California enacted the California Consumer Privacy Act (CCPA).

The CCPA requires covered businesses to comply with requirements that give consumers the right to know what information is being collected from them and whether such information is sold or disclosed to third parties.

The statute also allows consumers to access, delete, and prevent the sale of personal information that has been collected by covered businesses in certain circumstances.

The CCPA does not apply to personal information collected, processed, sold, or disclosed pursuant to the GLBA or the California Financial Information Privacy Act.

We are a covered business under the CCPA, which became effective on January 1, 2020.

In 2020, the State of California amended the CCPA by passing a ballot initiative known as the California Privacy Rights Act.

This initiative added a number of requirements to the CCPA with which we are finalizing our compliance.

We continue to monitor, and have a program in place to comply with, applicable privacy, information security and data protection requirements imposed by federal, state, and foreign laws.

However, if we experience a significant cybersecurity incident or our regulators deemed our information security controls to be inadequate, we could be subject to supervisory criticism or penalties, and/or suffer reputational harm.

However, if we experience a significant cybersecurity incident or our regulators deem our information security controls to be inadequate, we could be subject to supervisory criticism or penalties, and/or suffer reputational harm.

For further discussion of privacy, data protection and cybersecurity, and related risks for our business, see “Part I—Item 1A.

Risk Factors” under the headings “Regulation in the areas of privacy, data protection, data governance, account access and information and cyber security could increase our costs and affect or limit our business opportunities and how we collect and/or use personal information”, “Failure to safeguard our data and consumer privacy could affect our reputation among our partners and their customers, and may expose us to legal claims”, and “Business interruptions, including loss of data center capacity, interruption due to cyber-attacks, loss of network connectivity or inability to utilize proprietary software of third party vendors, could affect our ability to timely meet the needs of our partners and customers and harm our business”.

Cybersecurity”.

Human Capital

Providing a meaningful value proposition for our associates is a top priority for us.

We seek to enhance our associate value proposition continuously to ensure that we offer competitive rewards, career opportunities and workplace conditions, which we believe will allow us to attract and retain a highly qualified and motivated workforce.

As of December 31, 2023, we employed approximately 7,000 associates worldwide, with the majority concentrated in the United States.

Attracting, developing and retaining top talent is critical to our business.

As a core component of our broader Environmental, Social and Corporate Governance (ESG) and sustainability efforts, our key human capital management objective is to promote an inclusive, engaged culture that empowers associates through opportunities to grow, develop and lead.

We promote an inclusive, engaged culture that empowers associates through opportunities to grow, develop and lead.

Our associates have been, and will remain the backbone of our business, and we take a holistic approach to our associates’ experiences, recognizing that an engaged workforce drives our long-term growth and sustainability.

Our Board of Directors and Compensation & Human Capital Committee provide the important oversight of our human capital management strategy, including diversity, equity and inclusion (DE&I) efforts, which are led by our Head of Diversity and Inclusion and our Chief Diversity Officer.

Our Board of Directors and Compensation & Human Capital Committee provide the important oversight of our human capital management strategy, including diversity, equity, inclusion and belonging (DEI+B) efforts, which are led by our Head of Diversity and Inclusion.

Our Compensation & Human Capital Committee and our full Board of Directors receive regular updates from senior management and third-party consultants on human capital trends and developments, and other key human capital matters that drive our ongoing success and performance.

Associate Health and Wellbeing

Associate health and wellbeing remains a top human capital priority, and we are committed to providing our associates with competitive total compensation, benefits and wellness resources.

Our associates continue to express enthusiasm for the flexible remote work policies that we adopted during the COVID-19 pandemic, and approximately 95% of our total workforce continues to successfully work from home, either on a fully-remote or hybrid basis.

Associate Health and Well-Being

Associate health and well-being remains a top human capital priority, and we are committed to providing our associates with competitive total compensation, benefits and wellness resources.

Our associates continue to value flexible remote work policies that allow them to find a balance of office-work time and remote-work time.

Approximately 98% of our United States workforce works on a hybrid office/remote schedule.

We intend to continue these flexible work arrangements, seeking to take advantage of the engagement and productivity benefits associated with increased flexibility, as well as opportunities for connectedness and social interaction.

Other associate wellbeing resources include mental health awareness and counselling support, financial education and wellness courses, a variety of fitness and meditation classes, a wellbeing cost reimbursement program and other benefits to promote mental and physical health supportive of holistic wellbeing.

Additionally, during 2022 we further improved the competitiveness of our associate benefit offerings, including:

(i) enhancements to our medical benefits, such as the removal of a 30-day waiting period for new hires to enroll and the addition of travel benefits for reproductive and other fertility services;

(ii) improvements to our paid time off and flex time off policies;

(iii) the addition of two new paid holidays (bringing the total to 11);

and (iv) expanded mental health services, including increased access to free therapy sessions, dedicated care navigators and mental health medication management services.

Other associate well-being resources include mental health awareness and counselling support, financial education and wellness courses, a variety of fitness and meditation classes, a well-being cost reimbursement program and other benefits to promote mental and physical health supportive of holistic well-being.

During 2023, we further improved the competitiveness of our associate benefit offerings in various ways, including:

(i) enhancements to our Bread Financial 401(k) Plan with options for associates who may otherwise be unable to save for retirement, including providing additional compensation equal to 3% of eligible pay each year into all eligible associates’ 401(k) accounts;

(ii) improvements to our work location and work-at-home associate policies;

and (iii) the addition of two new benefits to support student loan assistance and comprehensive financial wellness support.

Tabl e of Contents

1 unchanged sentence

Delivering an exceptional experience for our customers relies on our ability to cultivate an engaging and rewarding experience for our associates.

We maintained high levels of associate engagement and retention in 2022 and were successful with talent acquisition, hiring several top industry leaders in key positions that further supported our transformation initiatives and business priorities.

We maintained high levels of associate engagement and retention in 2023 and were successful with talent acquisition in key areas.

As discussed further below, in 2023 we continued to focus on developing our internal talent to increase lateral movement across the organization, with 28% of the 723 new jobs posted in 2023 being ultimately filled by internal candidates.

We continue to listen to and act on feedback from our associates, including through our annual Associate Survey and other more frequent surveys and communications.

Each year after the results of the annual Associate Survey have been tabulated, our senior management presents those results to our Compensation & Human Capital Committee and our Board of Directors, including discussion regarding trends observed and actions to be taken in response to the results.

We continue to listen to and act on feedback from our associates, including through our annual Associate Experience Survey and other more frequent surveys and communications.

Each year after the results of the annual Associate Experience Survey have been tabulated, our senior management presents those results to our Compensation & Human Capital Committee and our Board of Directors, including discussion regarding trends observed and actions to be taken in response to the results.

Input from our Board helps inform our human capital strategies and objectives going forward;

our global themes for 2023 include promoting career opportunities for our associates, further optimizing our future work environment and ensuring associates have the appropriate tools, resources and technology to work effectively, whether in-office or remote.

our global themes for 2024 include providing career opportunities to our internal talent pool, optimizing teamwork and collaboration across a geographically diverse workforce, and focus on clear communication of business and organizational changes in a dynamic environment.

Workforce Readiness, Growth and Advancement

As part of our broader multi-year business transformation, our “future workforce” steering committee, comprised of senior human resources, technology and operations management, continued to develop and execute human capital-intensive strategies to ensure our workforce readiness, growth and advancement.

During the year we completed our second-annual, six-month apprenticeship program, which created a feeder pipeline from roles in our Care Centers to other non-Care Center opportunities across the organization, with 22 U.S.

As part of our broader multi-year business transformation, our “work environment of the future” steering committee, comprised of senior human resources, technology and operations management, continued to mature and execute human capital-intensive strategies to ensure workforce readiness, growth and advancement.

During the year we completed our third-annual, six-month apprenticeship program, which created a feeder pipeline from roles in our Care Centers to other non-Care Center opportunities across the organization, with 28 U.S.

associates (or 90% of program participants) transitioning to new roles at the conclusion of their apprenticeships.

Robust training and development remains central to our human capital strategy, and in 2022 we expanded our training programs to include a more advanced mentorship program that matches associates with an internal mentor who will help further their unique career journey and development needs.

Robust training and development remains central to our human capital strategy.

In 2022 we expanded our training programs to include a more advanced mentorship program that matches associates with internal mentors who help further their unique career journeys and development needs.

That program was so well received that, in 2023, we replicated its framework for a mentorship program for new associates to aid them in learning the business and building a work network, and we introduced a new Business Resource Group (BRG) specifically for new associates.

In addition to career-oriented training and development, we require annual associate training to ensure ongoing adherence to responsible business practices and ethical conduct, and all associates must certify annually that they have read and will adhere to our Code of Ethics.

We believe these efforts resonated with our associates, as we saw a 3% improvement in associates’ perceptions of the professional growth and development initiatives taken by us, reflected in our 2022 annual Associate Survey.

Diversity, Equity and Inclusion

We are committed to creating an inclusive culture that attracts and values diversity - of thought, experience, background, skills and ideas.

Over the past few years, we have renewed and accelerated our actions and activities in support of DE&I.

In 2021, we appointed a Chief Diversity Officer (CDO), hired a Vice President of DE&I and appointed an associate-led DE&I Council.

Together, these actions resulted in establishing a Diversity, Equity and Inclusion Office, solidifying our focus on these efforts.

Additionally our eight Business Resource Groups, made up of over 700 associate members, act as a catalyst for ensuring a fully inclusive and engaging work environment.

Our DE&I strategy is embedded into our overall governance process and business model, demonstrating our elevated commitment and accountability to this imperative.

Diversity, Equity, Inclusion and Belonging

We are committed to creating an inclusive culture that attracts and values diversity of thought, experience, background, skills and ideas, driving a sense of belonging.

Over the past few years, we have renewed and accelerated our actions and activities in support of DEI+B, including through the establishment of an associate-led DEI+B Council and DEI+B Office.

We now have nine BRGs, made up of over 1,300 associate members.

The evolution of our BRGs have driven 28 professional and personal development programs and grew our associate engagement in our wellness programs by 16%.

Our DEI+B strategy is embedded into our overall governance process and business model, demonstrating our elevated commitment and accountability to this imperative.

The strategy describes what we seek to accomplish and how we will measure progress across four focus areas:

(i) Workforce - creating pathways for hiring and promotions that map to market availability;

(ii) Workplace - promoting an inclusive, engaged culture that empowers associates through opportunities to grow, develop and lead;

(iii) Marketplace - infusing DE&I into our growth strategy, product delivery, customer experience and supply chain;

and (iv) Community – building strategic partnerships that empower our communities and advance business priorities.

As of December 31, 2022 , approximately 67% of our total work force and 44% of our senior leaders were female, while approximately 47% of our total work force and 15% of our senior leaders were minorities.

We are committed to sustainability, including integrating ESG principles into our business strategy in ways that optimize opportunities to make positive impacts while advancing long-term financial and reputational goals.

As part of our business transformation, in 2021, our Board approved an enhanced and modernized ESG strategy intended to drive additional progress on initiatives that promote sustainability, diversity, equity and inclusion, and increased transparency in our disclosures.

(i) Workforce - creating pathways for hiring, development and promotions that map to market availability;

(ii) Workplace - promoting an inclusive, engaged culture that drives a sense of belonging and empowers associates through opportunities to grow, develop and lead;

(iii) Marketplace - infusing DEI+B into our growth strategy, product delivery, customer experience and supply chain;

and (iv) Community - building strategic partnerships that empower our communities, advance business priorities and drive associate engagement.

As of December 31, 2023, approximately 63% of our total workforce and 44% of our senior leaders were female, while approximately 44% of our total workforce and 15% of our senior leaders were minorities.

Environmental, Social & Governance Strategy

We are committed to sustainability, including integrating Environmental, Social & Governance (ESG) principles into our business strategy in ways that optimize opportunities to make positive impacts while advancing long-term financial and reputational goals.

We prioritize initiatives that empower our communities, preserve our planet and promote diversity, equity and inclusion, as well as increased transparency in our disclosures.

We continue to advance the integration of ESG into our overall governance and risk management practices.

Additional information regarding our responsible business practices can be found in our annual sustainability and TCFD (Taskforce on Climate-Related Financial Disclosures)

Tabl e of Contents

Additional information regarding our ESG strategy and initiatives can be found in our annual ESG reports, which are published on our corporate website at:

reports, which are published on our corporate website at:

https://investor.breadfinancial.com/sustainability/.

8 unchanged sentences

These documents are posted to our website as soon as reasonably practicable after we have filed or furnished these documents with the SEC.

We post our Audit Committee, Risk Committee, Compensation & Human Capital Committee and Nominating and Corporate Governance Committee charters, our corporate governance guidelines, and our code of ethics, code of ethics for senior financial officers, and code of ethics for Board members on our website.

These documents are available free of charge to any stockholder upon request.

We post our Audit Committee, Risk & Technology Committee, Compensation & Human Capital Committee and Nominating and Corporate Governance Committee charters, our corporate governance guidelines, and our code of ethics, code of ethics for senior financial officers, and code of ethics for Board members on our website.

Tabl e of Contents

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business