Accounts Receivable and Loans

12 Months Ended

Dec. 31, 2018

NOTE 3

Loans and Accounts Receivable

Our lending and charge payment card products result in the generation of Card Member loans and Card Member receivables, respectively.

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 us. 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. Our 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 we believe will not be collected.

Card Member loans by segment and Other loans as of December 31, 2018 and 2017 consisted of:

(Millions)		2018		2017
Global Consumer Services Group^(a)	$	69,458	$	62,319
Global Commercial Services		12,396		11,080
Card Member loans		81,854		73,399
Less: Reserve for losses		2,134		1,706
Card Member loans, net	$	79,720	$	71,693
Other loans, net^(b)	$	3,676	$	2,607

Includes approximately $33.2 billion and $25.7 billion of gross Card Member loans available to settle obligations of a consolidated VIE as of December 31, 2018 and 2017, respectively. The balance as of December 31, 2018 also includes loans related to the acquired Hilton portfolio (refer to Note 2).
Other loans primarily represent consumer and commercial non-card financing products. Other loans are presented net of reserves for losses of $124 million and $80 million as of December 31, 2018 and 2017, 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 our maximum exposure.

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, 2018 and 2017 consisted of:

(Millions)	2018		2017
Global Consumer Services Group^(a)	$	21,455	$	20,946
Global Commercial Services		34,438		33,101
Card Member receivables		55,893		54,047
Less: Reserve for losses		573		521
Card Member receivables, net	$	55,320	$	53,526
Other receivables, net^(b)	$	2,907	$	3,209

Includes $8.5 billion and $8.9 billion of gross Card Member receivables available to settle obligations of a consolidated VIE as of both December 31, 2018 and 2017, respectively.
Other receivables primarily represent amounts related to (i) GNS partners for items such as royalty and franchise fees, (ii) tax-related receivables, (iii) certain merchants for billed discount revenue, and (iv) loyalty coalition partners for points issued, as well as program participation and servicing fees. Other receivables are presented net of reserves for losses of $25 million and $31 million as of December 31, 2018 and 2017, 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, 2018 and 2017:

2018 (Millions)			Current		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Total
Card Member Loans:
Global Consumer Services Group		$	68,442	$	290	$	220	$	506	$	69,458
Global Commercial Services
	Global Small Business Services		12,195		51		32		73		12,351
	Global Corporate Payments^(a)		(b)		(b)		(b)		―		45
Card Member Receivables:
Global Consumer Services Group			21,207		80		50		118		21,455
Global Commercial Services
	Global Small Business Services	$	16,460	$	101	$	53	$	114	$	16,728
	Global Corporate Payments^(a)		(b)		(b)		(b)	$	129	$	17,710

2017 (Millions)			Current		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Total
Card Member Loans:
Global Consumer Services Group		$	61,491	$	238	$	190	$	400	$	62,319
Global Commercial Services
	Global Small Business Services		10,892		43		31		59		11,025
	Global Corporate Payments^(a)		(b)		(b)		(b)		―		55
Card Member Receivables:
Global Consumer Services Group			20,696		82		54		114		20,946
Global Commercial Services
	Global Small Business Services	$	15,868	$	91	$	54	$	106	$	16,119
	Global Corporate Payments^(a)		(b)		(b)		(b)	$	148	$	16,982

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 we initiate collection procedures on an account prior to the account becoming 90 days past billing, the associated Card Member loan or receivable balance is classified as 90 days past billing. These amounts are shown above as 90+ Days Past Due for presentation purposes. See also (b).
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:

	2018						2017
	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:
Global Consumer Services Group	2.1	%	2.5	%	1.5	%	1.8	%	2.2	%	1.3	%
Global Small Business Services	1.7	%	2.0	%	1.3	%	1.6	%	1.9	%	1.2	%
Card Member Receivables:
Global Consumer Services Group	1.6	%	1.8	%	1.2	%	1.5	%	1.7	%	1.2	%
Global Small Business Services	1.7	%	2.0	%	1.6	%	1.6	%	1.8	%	1.6	%

					2018				2017
					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					0.11	%	0.7	%	0.10	%	0.9	%

We present 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 we consider uncollectible interest and/or fees in estimating our reserves for credit losses, a net write-off rate including principal, interest and/or fees is also presented.

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 we will be unable to collect all amounts due according to the original contractual terms of the Card Member agreement. We consider 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, we 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. We have classified Card Member loans and receivables in these modification programs as TDRs and continue 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 our 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. We establish 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 receivables balance. We determine 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 our impaired Card Member loans and receivables as of December 31, 2018, 2017 and 2016. Impaired Card Member loans and receivables outside the U.S. are not significant as of December 31, 2018, 2017 and 2016; therefore, such loans and receivables are not included in the following tables unless otherwise noted.

	As of December 31, 2018
							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:
Global Consumer Services Group^(f)	$	344		$	236		$	313		$	131		$	1,024	$	923	$	80
Global Commercial Services		43			43			59			29			174		161		14
Card Member Receivables:
Global Consumer Services Group		―			―			29			13			42		42		2
Global Commercial Services		―			―			61			25			86		86		5
Total	$	387		$	279		$	462		$	198		$	1,326	$	1,212	$	101

	As of December 31, 2017
							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:
Global Consumer Services Group^(f)	$	289		$	168		$	178		$	131		$	766	$	694	$	49
Global Commercial Services		38			31			31			27			127		118		8
Card Member Receivables:
Global Consumer Services Group		―			―			15			9			24		24		1
Global Commercial Services		―			―			37			19			56		56		2
Total	$	327		$	199		$	261		$	186		$	973	$	892	$	60

	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		UnpaidPrincipalBalance		Allowance for TDRs
Card Member Loans:
Global Consumer Services Group^(f)	$	230		$	139		$	165		$	129		$	663	$	609	$	51
Global Commercial Services		30			30			26			26			112		103		9
Card Member Receivables:
Global Consumer Services Group		―			―			11			6			17		17		7
Global Commercial Services		―			―			28			10			38		38		21
Total	$	260		$	169		$	230		$	171		$	830	$	767	$	88

Our policy is generally to accrue interest through the date of write-off (typically 180 days past due). We establish reserves for interest that we believe 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 we have ceased accruing interest. Amounts presented exclude Card Member loans classified as a TDR.
Accounts classified as a TDR include $17 million, $15 million and $20 million that are over 90 days past due and accruing interest and $6 million, $5 million and $11 million that are non-accruals as of December 31, 2018, 2017 and 2016, respectively.
In Program TDRs include Card Member accounts that are currently enrolled in a modification program.
Out of Program TDRs include $148 million, $141 million and $132 million of Card Member accounts that have successfully completed a modification program and $50 million, $45 million and $39 million of Card Member accounts that were not in compliance with the terms of the modification programs as of December 31, 2018, 2017 and 2016, respectively.
GCSG includes balances outside the U.S. of $69 million, $56 million and $52 million that are over 90 days and accruing interest and $68 million, $55 million and $51 million in unpaid principal as of December 31, 2018, 2017 and 2016, respectively.

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

2018 (Millions)		Average Balance	Interest Income Recognized
Card Member Loans:
Global Consumer Services Group	$	878	$	109
Global Commercial Services		150		21
Card Member Receivables:
Global Consumer Services Group		33		―
Global Commercial Services		73		―
Total	$	1,134		130

			Interest Income
2017 (Millions)		Average Balance	Recognized
Card Member Loans:
Global Consumer Services Group	$	699	$	85
Global Commercial Services		120		17
Card Member Receivables:
Global Consumer Services Group		20		―
Global Commercial Services		45		―
Total	$	884	$	102

			Interest Income
2016 (Millions)		Average Balance	Recognized
Card Member Loans:
Global Consumer Services Group	$	612	$	68
Global Commercial Services		103		13
Card Member Receivables:
Global Consumer Services Group		14		―
Global Commercial Services		28		―
Total	$	757	$	81

Card Member Loans and Receivables Modified as TDRs

The following table provides additional information with respect to Card Member loans and receivables modified as TDRs for the years ended December 31:

2018		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	51	$	377	12	(b)
	Card Member Receivables	6		110	(c)	28
Total		57	$	487

2017		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	33	$	224	10	(b)
	Card Member Receivables	6		83	(c)	28
Total		39	$	307

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

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 principal balance.
For Card Member loans, there have been no payment term extensions.
We do 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 Card Member loans and receivables modified as TDRs that subsequently defaulted within 12 months of modification for the years ended December 31, 2018, 2017 and 2016. A Card Member is considered in default of a modification program after one and up to two 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)
2018			(thousands)	(millions)
Troubled Debt Restructurings That Subsequently Defaulted:
	Card Member Loans		8	$	46
	Card Member Receivables		4		11
Total			12	$	57

		Number of Accounts		Aggregated Outstanding Balances Upon Default^(a)
2017			(thousands)	(millions)
Troubled Debt Restructurings That Subsequently Defaulted:
	Card Member Loans		6	$	39
	Card Member Receivables		3		7
Total			9	$	46

		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

The outstanding balances upon default include principal, fees and accrued interest on Card Member loans, and principal and fees on Card Member receivables.