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Discover Funding LLC – ‘SF-3’ on 7/2/15

On:  Thursday, 7/2/15, at 3:36pm ET   ·   As of:  6/30/15   ·   Accession #:  1193125-15-241312   ·   File #:  333-205455

Previous ‘SF-3’:  None   ·   Next:  ‘SF-3/A’ on 9/10/15   ·   Latest:  ‘SF-3’ on 11/10/21   ·   5 References:   By:  Discover Card Execution Note Trust – ‘10-K’ on 3/20/24 for 12/31/23 By:  Discover Card Execution Note Trust – ‘10-K’ on 3/24/23 for 12/31/22 By:  Discover Card Execution Note Trust – ‘10-K’ on 3/23/22 for 12/31/21 By:  Discover Card Execution Note Trust – Latest ‘SF-3’ on 11/10/21 By:  Discover Card Execution Note Trust – ‘10-K’ on 3/23/21 for 12/31/20 

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 6/30/15  Discover Funding LLC              SF-3        7/02/15    3:2.1M                                   RR Donnelley/FA

Document/Exhibit                   Description                      Pages   Size 

 1: SF-3        Shelf Registration Statement for a Qualified        HTML   1.53M 
                          Offering of Asset-Backed Securities                    
 2: EX-3.1      Articles of Incorporation/Organization or By-Laws   HTML    123K 
 3: EX-24.2     Power of Attorney                                   HTML     12K 

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As filed with the Securities and Exchange Commission on June 30, 2015

Registration No. 333-            

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM SF-3

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

DISCOVER CARD EXECUTION NOTE TRUST

(Issuing entity in respect of the Notes)

DISCOVER CARD MASTER TRUST I

(Issuing entity in respect of the Series 2007-CC Collateral Certificate)

DISCOVER FUNDING LLC

as depositor to the issuing entities described herein

(Exact name of registrant as specified in its charter)

Commission File Number of depositor: 333-            

Central Index Key Number of depositor: 0001645731

Central Index Key Number of sponsor: 0000894327

Discover Bank

(Exact name of sponsor as specified in its charter)

12 Read’s Way

New Castle, Delaware 19720

(302) 323-7315

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Michael F. Rickert

Vice President, Chief Financial Officer and Treasurer

Discover Funding LLC

12 Read’s Way

New Castle, Delaware 19720

(302) 323-7315

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies To:

Approximate date of commencement of proposed sale to the public: From time to time after this registration statement becomes effective, as determined by market conditions.

If any of the securities being registered on this Form SF-3 are to be offered pursuant to Rule 415 under the Securities Act of 1933, check the following box:  x

If this Form SF-3 is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  ¨

If this Form SF-3 is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  ¨

CALCULATION OF REGISTRATION FEE

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

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The information in this prospectus is not complete and may be amended. We may not sell these securities until we deliver a final prospectus. This prospectus is not an offer to sell nor are they seeking an offer to buy these securities in any jurisdiction where the offer or sale is prohibited.

SUBJECT TO COMPLETION DATED [●], 2015

PROSPECTUS DATED [●]

$[●] Class [    ](20[    ]-[    ]) Discover Series Notes¹

Discover Bank

Sponsor, Originator of Assets and Servicer

Central Index Key Number: 0000894327

Discover Funding LLC

Depositor

Central Index Key Number: 0001645731

Discover Card Execution Note Trust

Issuing Entity of the Notes

Central Index Key Number: 0001407200

Discover Card Master Trust I

Issuing Entity of the Collateral Certificate

Central Index Key Number: 0000894329

The Class [    ]([    ]-[    ]) notes are a tranche of Class [    ] DiscoverSeries notes, are secured by assets of the issuing entity, will be paid only from proceeds of such note’s allocable share of those assets and noteholders will have no recourse to any other assets.

[For Class B: Subordination: Interest and principal payments on Class B DiscoverSeries notes are subordinated to payments on Class A DiscoverSeries notes. The Class B([    ]-[    ]) notes will also provide loss protection to the Class A DiscoverSeries notes.]

[For Class C: Subordination: Interest and principal payments on Class C DiscoverSeries notes are subordinated to payments on Class A and Class B DiscoverSeries notes. The Class C([    ]-[    ]) notes will also provide loss protection to the Class A and Class B DiscoverSeries notes.]

Credit Enhancement: [For Class A: Class A DiscoverSeries notes receive credit enhancement through the subordination of interest and principal payments on Class B, Class C and Class D DiscoverSeries notes and through loss protection provided by such notes.] [For Class B: Class B DiscoverSeries notes receive credit enhancement through the subordination of interest and principal payments on Class C and Class D DiscoverSeries notes and through loss protection provided by such notes.] [For Class C: Class C DiscoverSeries notes receive credit enhancement through the subordination of interest and principal payments on Class D DiscoverSeries notes, through loss protection provided by such notes and through deposits into a Class C reserve account if excess spread-based funding triggers are breached as described in this prospectus. [The Class C reserve account for the Class C([    ]-[    ]) notes will not be funded at closing.]] [The Class [    ]([    ]-[    ]) notes will have the benefit of [supplemental credit enhancement] provided by [NAME] as [supplemental credit enhancement provider].]

[Interest Rate Swap: The Class [    ]([    ]-[    ]) notes will have the benefit of [an interest rate swap] provided by [NAME] as derivative counterparty.]

We refer to the Discover Card Execution Note Trust as the note issuance trust. The assets of the note issuance trust that secure the DiscoverSeries notes will include:

Delivery: The notes offered by this prospectus will be delivered in book-entry form. Except under limited circumstances, purchasers of notes will not be entitled to have the notes registered in their names and will not be entitled to receive physical delivery of the notes in definitive paper form.

[Stock Exchange: The Class [    ]([    ]-[    ]) notes will not be listed on any stock exchange.]

You should consider the discussion under “Risk Factors” beginning on page 39 in this prospectus before you purchase any Class [    ]([    ]-[    ]) DiscoverSeries notes.

The Class [    ]([    ]-[    ]) DiscoverSeries notes are obligations of the note issuance trust only and are not obligations of or interests in Discover Bank, its affiliates or any other person, except that the noteholders’ proportionate share of interests in the master trust receivables represented by the collateral certificate may be sold to pay the notes in the limited circumstances described in this prospectus. Noteholders will have no recourse to any assets of the note issuance trust other than those specified in this prospectus for the payment of the Class [    ]([    ]-[    ]) DiscoverSeries notes. The Class [    ]([    ]-[    ]) DiscoverSeries notes are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality.

Neither the SEC nor any state securities commission has approved these notes or determined that this prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

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Important Notice about Information Presented in this Prospectus

We provide information to you about the notes, including:

We include cross-references in this prospectus to captions in this prospectus where you can find further related discussions. The table of contents in this prospectus provides the pages on which these captions are located.

This prospectus may be used to offer and sell the class or tranche of DiscoverSeries notes listed on the cover of this prospectus.

It is important for you to read and consider all information contained in this prospectus in making your investment decision.

We are not offering the notes in any jurisdiction where the offer is not permitted. We do not claim the accuracy of the information in this prospectus as of any date other than the date stated on the cover of this prospectus.

We have included a glossary of the capitalized terms used in this prospectus.

The SEC allows us to incorporate by reference information we file with it, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus. Information that we file later with the SEC will automatically update the information in this prospectus. In all cases, you should rely on the later information over different information included in this prospectus for any class or tranche of notes. We incorporate by reference any future annual, monthly and special reports and proxy materials filed by or on behalf of the master trust and the note issuance trust with the SEC until we terminate our offering of the notes.

You should rely only on the information contained or incorporated by reference in this prospectus. We have not authorized anyone to provide you with different information.

Forward-Looking Statements

In this prospectus and in the documents incorporated herein by reference, we may communicate statements relating to the future performance of, or the effect of various circumstances on, Discover Bank and its affiliates, the depositor, the note issuance trust, the master trust or your notes that may be considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not historical facts and represent only our beliefs and expectations regarding future events, many of which, by their nature, are inherently uncertain and beyond our control. The actual outcomes may differ materially from those included in the forward-looking statements. Forward-looking statements are typically identified by the words “believe,” “expect,” “anticipate,” “intend,” “estimate” and similar expressions. These statements may relate to, among other things, effects of the current economic environment, effects of insolvency, arbitration or litigation proceedings and effects of legislation or regulatory actions. Actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties, including, but not limited to, changes in political and economic conditions, market conditions, interest rate fluctuations, competitive product and pricing pressures, consumer bankruptcies and inflation; technological change; the impact of current, pending or future legislation and regulation (including the Dodd-Frank Act and regulatory changes specifically intended to address financial markets in the current economic downturn, capital requirements and liquidity reserves, securitizations, sales of financial

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assets, and credit origination, billing and collection practices), changes in fiscal, monetary, regulatory, accounting and tax policies; monetary fluctuations; and success in gaining regulatory approvals when required, as well as other risks and uncertainties, including, but not limited to, those described in “Risk Factors” in this prospectus. The continued economic downturn, recent financial market and other conditions beyond our control have increased uncertainty regarding future economic conditions and may increase the risk that actual results may differ from those expected. Accordingly, you are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made. We do not undertake any obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Reports to Investors

The note issuance trust will, in cooperation with Discover Bank, as master servicer for the master trust, prepare monthly reports for each outstanding series of notes, including the notes offered by this prospectus, containing information about the master trust, the note issuance trust and that series. You may obtain a copy of each report free of charge by calling (302) 323-7315. The reports will not contain financial information that has been examined and reported on by independent public accountants. Discover Bank does not intend to send you any of its financial reports.

Where You Can Find More Information

Discover Funding LLC, in its capacity as depositor for the note issuance trust and the master trust, has filed a registration statement with registration numbers 333-[●], 333-[●] and 333-[●] with the SEC on behalf of the note issuance trust and the master trust relating to the notes and the collateral certificate offered by this prospectus. The SEC file numbers for Discover Funding LLC, the master trust and the note issuance trust are [●], 000-23108 and 333-141703-02, respectively.

You may read and copy any reports, statements or other information that the depositor, the master trust or the note issuance trust files at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549, on official business days between the hours of 10:00 am and 3:00 pm.

You can request copies of these documents, upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at (800) SEC-0330 for further information on the operation of the public reference rooms. SEC filings relating to the note issuance trust and the master trust will also be available to the public on the SEC Internet site (http://www.sec.gov). The master trust and the note issuance trust are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and in accordance with that act, Discover Funding LLC, on behalf of the note issuance trust and the master trust, files reports and other information with the SEC.

In addition, SEC filings relating to the note issuance trust and the master trust, as well as certain investor reports, are available at http://investorrelations.discoverfinancial.com.

We “incorporate by reference” certain information we file with the SEC, which means that we can disclose important information to you by referring you to those documents. The information that is incorporated by reference is considered to be part of this prospectus. Information that we file later with the SEC that is incorporated by reference will automatically update the information in this prospectus. In all cases, you should rely on the most recent information over other information included in this prospectus. We incorporate by reference in this prospectus any monthly distribution reports on Form 10-D and current reports on Form 8-K subsequently filed by or on behalf of the master trust or the issuance trust with the SEC before the termination of the offering of the notes.

As a recipient of this prospectus, you may request a copy of any document we incorporate by reference, except exhibits to the documents, unless the exhibits are specifically incorporated by reference, at no cost, by writing or calling Discover Bank, as master servicer for the master trust and as calculation agent for the note issuance trust, at 12 Read’s Way, New Castle, Delaware 19720, (302) 323-7315, attention to Michael F. Rickert.

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Notice to United Kingdom Investors

This prospectus may only be communicated or caused to be communicated in the United Kingdom to persons authorized to carry on a regulated activity under the Financial Services and Markets Act 2000, as amended (“FSMA”) or to persons otherwise having professional experience in matters relating to investments and qualifying as investment professionals under Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the “2005 Order”); or to persons falling within Article 49(2)(a) to (d) (“high net worth companies, unincorporated associations etc”) of the 2005 Order; or to any other person to whom this prospectus may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as, “Relevant Persons”).

Neither this prospectus nor the notes are or will be available to other categories of persons in the United Kingdom and any person in the United Kingdom that is not a Relevant Person shall not be entitled to rely on, and they must not act on, any information in this prospectus. The communication of this prospectus to any person in the United Kingdom other than a Relevant Person is unauthorized and may contravene the FSMA.

NOTICE TO RESIDENTS OF THE EUROPEAN ECONOMIC AREA

This prospectus has been prepared on the basis that any offers of notes in any Member State of the European Economic Area which has implemented the Prospectus Directive (each a “Relevant Member State”) will be made pursuant to an exemption under the Prospectus Directive from the requirement to publish a prospectus for offers of notes. Accordingly, any person making or intending to make an offer in a Relevant Member State of notes which are the subject of the offering contemplated in this prospectus may only do so in circumstances in which no obligation arises for us, Discover Bank, Discover Funding LLC or any of the underwriters to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive, in each case, in relation to such offer. None of us, Discover Bank, Discover Funding LLC nor any of the underwriters have authorized, nor do we or they authorize, the making of any offer of notes in circumstances in which an obligation arises for us, Discover Bank, Discover Funding LLC or any of the underwriters to publish or supplement a prospectus for such offer. The expression “Prospectus Directive” means Directive 2003/71/EC (as amended, including by Directive 2010/73/EU), and includes any relevant implementing measure in the Relevant Member State.

Compliance with the EU Risk Retention Rules

On January 1, 2014, Regulation (EU) No. 575/2013, known as the Capital Requirements Regulation (“CRR”), became effective, including Articles 404-410 of CRR. CRR applies to credit institutions and investment firms established in a member state of the European Economic Area and, in certain cases, consolidated group affiliates thereof (including those that are established outside of the European Economic Area) that invest in or have an exposure to credit risk in securitizations. Provisions similar to Articles 405-406 of CRR (together with those Articles and any implementing legislation, regulations, technical standards and guidelines, “EU Risk Retention Rules”) apply to alternative investment fund managers pursuant to Article 17 of Directive 2011/61/EU, known as the Alternative Investment Fund Managers Directive (“AIFMD”), and to insurance and reinsurance companies under Article 135(2) of Directive 2009/138/EC of 25 November 2009, known as Solvency II, as amended by Directive 2014/51/EU of 16 April 2014 (known as Omnibus II), and are expected to apply in the future to undertakings for collective investment in transferrable securities (“UCITS”) pursuant to Article 50a of Directive 2009/65/EC of July 13, 2009, known as the UCITS Directive, as amended by AIFMD.

None of Discover Card Execution Note Trust, Discover Card Master Trust I, Discover Bank, Discover Funding LLC, the master trust trustee and indenture trustee, the owner trustee or any underwriter or any affiliate makes any representation or agreement that it is undertaking or will have undertaken to comply (or to take or retain from taking any action to facilitate compliance by affected investors) with the requirements of Articles 405 and 406 of the European Union (EU) CRR (Regulation (EU) No. 575/2013 of June 26, 2013), or any corresponding requirements adopted or to be adopted pursuant to Article 17 of the EU Alternative Investment Fund Managers Directive (Directive 2011/61/EU of June 8, 2011) (AIFMD), Article 135(2) of the EU Solvency II Directive (Directive 2009/138/EC of November 25, 2009, as amended by Directive 2014/51/EU of April 16, 2014), or Article 50a of the EU Directive on Undertakings for Collective Investment in Transferrable Securities (UCITS) (Directive 2009/65/EC of July 13, 2009, as amended by AIFMD), each as implemented in any member state of the EU or the European Economic Area (EEA), in each case together with any delegated regulation or technical standard

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implementing any of them, or any other law or regulation of the EU, any EEA member state or any other jurisdiction which imposes regulatory requirements as to risk retention, due diligence and monitoring or other conditions with respect to investments in securitization transactions by affected investors. Noteholders are responsible for analyzing their own regulatory position and are advised to consult with their own advisors regarding the suitability of the notes for investment and compliance with any such law or regulation.

Volcker Rule Considerations

Discover Card Execution Note Trust is not now, and immediately following the issuance of the Class [    ]([    ]-[    ]) notes pursuant to the indenture will not be, a “covered fund” for purposes of regulations adopted under Section 13 of the Bank Holding Company Act of 1956 (the “BHCA”), commonly known as the “Volcker Rule.” In reaching this conclusion, although other statutory or regulatory exemptions under the Investment Company Act of 1940, as amended (the “Investment Company Act”), and under the Volcker Rule and its related regulations may be available, we have relied on the determinations that

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Risk Factors

The risk factors disclosed in this section describe the principal risk factors of an investment in the notes. You should consider the following risk factors before you decide whether or not to purchase the notes.

Security Interest Matters

Master Trust’s Interest in Receivables. The master trust’s interest in the receivables and interchange may be impaired if the trustee for the master trust does not have a perfected security interest in the receivables and interchange pursuant to the Uniform Commercial Code in effect in Delaware. A security interest under the UCC includes an interest in personal property that secures payment of an obligation and any interest of a buyer of accounts such as the receivables.

In general, a security interest in receivables and interchange is perfected against Discover Bank or Discover Funding LLC, as applicable, if it can be enforced not only against Discover Bank or Discover Funding LLC, respectively, but also against creditors of Discover Bank or Discover Funding LLC, as applicable, that might want to claim those receivables and interchange. Discover Bank has taken certain actions to perfect Discover Funding LLC’s interest in the receivables and interchange, including filing financing statements of Discover Funding LLC’s interest with the Secretary of State of the State of Delaware. Discover Funding LLC has taken certain actions to perfect the master trust’s interest in the receivables and interchange, including filing financing statements of the master trust’s interest with the Secretary of State of the State of Delaware.

DCENT’s Interest in the Collateral Certificate. If DCENT’s interest in the collateral certificate were to be characterized as a secured financing rather than a true sale, DCENT’s interest in the collateral certificate may be impaired if DCENT does not have a perfected security interest in the collateral certificate pursuant to the UCC. Although DCENT and Discover Funding LLC will each treat the transfer of the collateral certificate to DCENT as a sale of the collateral certificate, Discover Funding LLC has granted DCENT a backup security interest in the collateral certificate. DCENT has taken certain actions to perfect its interest in the collateral certificate, including filing financing statements, to reflect DCENT’s interest in the collateral certificate with the Secretary of State of the State of Delaware.

Indenture Trustee’s Interest in the Collateral Certificate. Similarly, the indenture trustee’s interest in the collateral certificate may be impaired if the indenture trustee does not have a perfected security interest in the collateral certificate pursuant to the UCC. DCENT has granted a security interest in the collateral certificate to the indenture trustee for the benefit of the holders of the DiscoverSeries notes, including the Class [    ]([    ]-[    ]) notes. DCENT has taken certain actions to perfect the indenture trustee’s security interest in the collateral certificate and otherwise protect the interest of the indenture trustee, including filing financing statements of the indenture trustee’s interest with the Secretary of State of the State of Delaware and causing the collateral certificate to be registered in the name of and held by the indenture trustee. In addition, DCENT is limited by its governing documents in its ability to incur debts other than those incurred under the indenture.

Each financing statement filed with the Secretary of State of the State of Delaware will lapse on the fifth anniversary of the filing date of such financing statement unless an appropriate continuation statement is filed within the time period specified in the UCC and the effectiveness of such financing statement may lapse much sooner than the fifth anniversary of such filing date in the event of certain changes in the name or legal location of Discover Bank, Discover Funding LLC or DCENT, as applicable, or a merger of Discover Bank, Discover Funding LLC or DCENT with another entity, in each case unless appropriate amendments or new financing statements of the security interest are filed in the appropriate public filing office. Accordingly, unless Discover Bank, Discover Funding LLC, DCENT, the trustee for the master trust or the indenture trustee, as applicable, files appropriate continuation statements, amendments and/or new financing statements within the applicable time periods specified in the UCC, the perfection of the master trust’s security interest in the receivables and interchange or the indenture trustee’s security interest in the collateral certificate will lapse

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Priority of Liens

Each of Discover Bank and Discover Funding LLC intend for the transfer of the receivables to be a sale or a contribution. Even so, a court could conclude that Discover Bank or Discover Funding LLC own the receivables and that the master trust holds only a security interest. Even if a court would reach that conclusion, however, steps will be taken to give the master trust a first-priority perfected security interest in the receivables. Nevertheless, a tax or governmental lien or other lien imposed under applicable state or federal law without consent on the property of Discover Bank or Discover Funding LLC arising before receivables are transferred to the master trust may be senior to the master trust’s interest in the receivables. In addition, the relevant documents permit Discover Bank to transfer the receivables to Discover Funding LLC subject to liens for taxes that are not yet due or are being contested. Regardless of whether the transfer of the receivables is a sale, a contribution or a secured borrowing, if any such liens exist, the claims of the creditors holding such liens would be superior to the rights of Discover Funding LLC or the master trust, as applicable, thereby possibly delaying or reducing payments on the DiscoverSeries notes.

More than one person can have a perfected security interest in the same assets, and the person with the higher priority, which is determined by statute, will have the first claim to the property. Because priority is determined by statute, a tax or statutory lien on Discover Bank’s or Discover Funding LLC’s property may have priority over the master trust’s interest in the receivables and interchange. Similarly, a tax or statutory lien on Discover Bank’s, Discover Funding LLC’s or DCENT’s property may have priority over the indenture trustee’s interest in the collateral certificate.

Insolvency Related Matters

If Discover Bank were to become insolvent, or if Discover Bank were to violate laws or regulations applicable to it, the FDIC could act as conservator or receiver for Discover Bank. If the FDIC is appointed as conservator or receiver for Discover Bank, it has the power under the Federal Deposit Insurance Act, as amended, to repudiate contracts, including contracts of Discover Bank such as the master trust’s pooling and servicing agreement, [the receivables sale and contribution agreement between Discover Bank and Discover Funding LLC] [and the assignment agreement between Discover Bank and Discover Funding LLC], to recover or reclaim receivables transferred to the depositor, and to terminate Discover Bank’s obligations to service the receivables and transfer new receivables to Discover Funding LLC for subsequent transfer to the master trust after the date of receivership. The FDIC may also argue that those rights to repudiate contracts extend to the indenture. The FDIC may not be subject to an express time limit in deciding to take these actions, and a delay by the FDIC in making a decision could result in losses on your investment. If the FDIC were successful in any of these actions, moreover, you may not be entitled under applicable law to the full amount of your damages.

We believe that some of these powers have been limited as a result of a series of safe harbor rules adopted by the FDIC:

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Each of the Old Safe Harbors provided that, with respect to financial assets transferred by an institution in connection with a securitization, and subject to certain conditions described in the Old Safe Harbors, the FDIC would not seek to recharacterize, recover or reclaim such financial assets in exercising its statutory authority to repudiate contracts pursuant to the Federal Deposit Insurance Act. Paragraph (d)(2)(ii) of the New Safe Harbor extends that safe harbor, including the commitment of the FDIC not to seek to recharacterize, recover or reclaim such financial assets, to any obligations of revolving trusts or master trusts, for which one or more obligations were issued as of the date of adoption of the New Safe Harbor, so long as certain conditions, discussed below, continue to be met. Each of the Safe Harbors provided or provides that the FDIC will not seek to enforce the “contemporaneous” requirements of the Federal Deposit Insurance Act. Securitizations that were engaged in while any of the Safe Harbors was in effect, and that met the terms of the applicable Safe Harbor, will continue to receive the protections of that Safe Harbor even if that Safe Harbor is later repealed or amended. Although the New Safe Harbor also provides alternative standards and safe harbor protections for transfers of assets in securitizations that do not meet the conditions of paragraph (d)(2), at this time we do not expect to take action to bring transfers to the master trust or the note issuance trust within those alternative safe harbors.

The applicability to the master trust and the note issuance trust of the provisions of the New Safe Harbor on which we are relying requires, among other things, that the transfer of the receivables from Discover Bank to Discover Funding LLC and, prior to [●], from Discover Bank to the master trust meet the conditions for sale accounting treatment under generally accepted accounting principles in effect prior to November 15, 2009. See “—FDIC Rule Regarding Securitizations” below for a description of the possible effects of the provisions of the New Safe Harbor on which we are relying no longer applying. Notwithstanding these Safe Harbors, we cannot assure you that the FDIC, as a result of its appointment as conservator or receiver, would not exercise its powers in a manner adverse to the Class [    ]([    ]-[    ]) noteholders, including finding certain provisions, such as amortization or early redemption triggers or events of default resulting solely from the appointment of a conservator or receiver for Discover Bank, unenforceable or subjecting any amortization or early redemption events, events of default or other rights of terminating, accelerating or affecting rights under a contract with, or exercising rights over property of, Discover Bank to an automatic stay of up to 90 days, and the FDIC may seek to extend this stay by seeking injunctive relief.

To the extent any bank regulator having jurisdiction over Discover Bank (including the FDIC in the case it is the conservator or receiver of Discover Bank) finds any contract or other arrangement entered into or maintained by Discover Bank to be in violation of safe and sound banking practices or applicable regulations, that regulator could order Discover Bank to remedy the violation, which could result in changes to contracts, including agreements related to the securitization, to which Discover Bank is a party. If any of these events were to occur, payments to you could be accelerated, delayed, or reduced. In addition, these events could result in other parties to the transaction documents being excused from performing their obligations, which could cause further losses on your investment. Furthermore, if the administrative expenses of a conservator or receiver for Discover Bank, or of a bankruptcy trustee for the master trust or DCENT, were found to relate to the receivables, the collateral certificate, or the transaction documents, those expenses could be paid from collections on the receivables before the master trust trustee, DCENT or the indenture trustee receives any payments, which could result in losses on your investment. See “The Originator and Sponsor — Insolvency-Related Matters.”

In the event of a receivership of Discover Bank, new transactions on the Discover cards issued by it might decline, potentially to zero. In such a circumstance, interchange would likely also decline, potentially to zero. Further, regardless of any decision made by the FDIC or any ruling made by a court, the mere fact that Discover Bank, the master trust, or DCENT has become insolvent or has entered conservatorship, receivership or bankruptcy could have an adverse effect on the value of the receivables and the collateral certificate and on the liquidity and the value of the notes. There also may be other possible effects of conservatorship, receivership, bankruptcy, or insolvency of Discover bank, the master trust, or DCENT that could result in delays or reductions in payments to you.

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Discover Bank, as servicer, will receive cash collections each month for the accounts of the master trust. Based on its current ratings, Discover Bank is generally required to deposit certain collections into the collections account within two business days of recording receipt of such collections, with such amounts available to pay interest and principal due on the Class [    ]([    ]-[    ]) notes on the following distribution date, under the cash flows for the collateral certificate, as more fully specified in the series supplement for the collateral certificate and in the indenture, indenture supplement and terms document for the Class [    ]([    ]-[    ]) notes. However, under certain circumstances, including if Discover Bank’s short-term rating meets specified minimums or Discover Bank posts a letter of credit acceptable to the rating agencies, or if the rating agencies agree to other conditions, Discover Bank may use those cash collections for its own benefit until it distributes them on the applicable distribution date. The master trust may not have a perfected security interest in any collections that Discover Bank has not deposited in the collections account for the master trust. Interchange may be required to be deposited to the master trust on the distribution date in each month, and the master trust may likewise not have a perfected security interest in any cash interchange payments Discover Bank has not deposited.

Discover Funding LLC may add to the master trust receivables in credit accounts other than accounts originated by Discover Bank, in which case the master trust may have additional originators and servicers. The trustee for the master trust must take certain actions to perfect the master trust’s interest in these receivables and the allocable portion of interchange calculated by reference to future net merchant sales on such accounts as well, and they will be subject to the same risks as Discover Bank receivables, namely that the perfection of the security interest will lapse, or that a tax or statutory lien on the originator’s property may have priority over the master trust’s interest. Similarly, the servicers of these receivables may use the cash collections they receive each month in the same manner and subject to the same conditions as Discover Bank. The master trust may not have a perfected security interest in any collections and interchange that the servicers have not deposited in the collections account for the master trust. Insolvency risks relating to these originators and servicers, moreover, will exist as well.

In addition, Discover Funding LLC is a wholly-owned bankruptcy remote subsidiary of Discover Bank and its limited liability company agreement limits the nature of its business. If, however, Discover Funding LLC became a debtor in a bankruptcy case, and either Discover Funding LLC’s transfer of the receivables to the master trust or Discover Funding LLC’s transfer of the collateral certificate to the note issuance trust were construed as a grant of a security interest to secure a borrowing, payments to noteholders of outstanding principal and interest could be delayed and possibly reduced.

Because Discover Funding LLC is a wholly-owned subsidiary of Discover Bank, certain banking laws and regulations may apply to Discover Funding LLC, and if Discover Funding LLC were found to have violated any of these laws or regulations, payments to noteholders could be delayed or reduced. In addition, if Discover Bank entered conservatorship or receivership, the FDIC could seek to exercise control over the receivables, the collateral certificate or Discover Funding LLC’s other assets on an interim or a permanent basis. Although steps have been taken to minimize this risk, the FDIC could argue that —

If these or similar arguments were made, whether successfully or not, payments to noteholders could be delayed or reduced.

Further, DCENT has been established to minimize the risk that it may become insolvent or enter bankruptcy. Nevertheless, it may be eligible to file for bankruptcy, and we cannot assure you that the risk of insolvency or bankruptcy has been eliminated. If DCENT were to become insolvent or if a bankruptcy petition were to be filed by or against DCENT, you could suffer a loss on your investment. If a bankruptcy petition were to be

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filed by or against DCENT, its assets, including the collateral certificate, would be treated as part of its bankruptcy estate. The master trust has also been established to minimize the risk that it may become insolvent or enter bankruptcy. Nevertheless, it may be eligible to file for bankruptcy, and we cannot assure you that the risk of insolvency or bankruptcy has been eliminated. If the master trust were to become insolvent or if a bankruptcy petition were to be filed by or against the master trust, you could suffer a loss on your investment. If a bankruptcy petition were to be filed by or against the master trust, its assets, including the receivables, would be treated as part of its bankruptcy estate.

Investor Risk of Loss

You will only receive payments of interest and principal on the Class [    ]([    ]-[    ]) notes to the extent that the note issuance trust has funds available to make these payments. The note issuance trust will allocate losses relating to charged-off receivables to the Class [    ]([    ]-[    ]) notes each month and will reimburse you for those losses only to the extent that the note issuance trust has funds available to make those reimbursements. You should review the cash flow provisions described in “Deposits and Allocation of Funds for DiscoverSeries Notes — Cash Flows” to understand the priority in which the note issuance trust allocates its assets to pay interest and principal and to reimburse losses on the Class [    ]([    ]-[    ]) notes and other notes in the DiscoverSeries. To the extent the note issuance trust cannot fully reimburse your losses, the aggregate amount of principal you ultimately receive will be less than the face amount of your notes, and the amount of collections and interchange allocated to the collateral certificate and the DiscoverSeries notes in any month may also be reduced.

Limited Recourse to DCENT

The sole sources of payment of principal of and interest or accreted discount on the Class [    ]([    ]-[    ]) notes prior to an event of default and acceleration or the legal maturity of the Class [    ]([    ]-[    ]) notes are:

However, if there is a sale of receivables in the master trust (i) following an event of default and acceleration for the Class [    ]([    ]-[    ]) notes and subject to any restrictions relating to required subordinated amounts or (ii) on the legal maturity date of the Class [    ]([    ]-[    ]) notes, as described in “Sources of Funds to Pay the Notes — Sale of Receivables,” you will have recourse only to (1) the proceeds of that sale allocable to the Class [    ]([    ]-[    ]) notes and (2) any amounts then on deposit in DCENT accounts allocated to and held for the benefit of the Class [    ]([    ]-[    ]) notes.

Your remedies may be limited if an event of default affecting the Class [    ]([    ]-[    ]) notes occurs. After the occurrence of an event of default affecting this tranche of notes and an acceleration of the Class [    ]([    ]-[    ]) notes, any funds in DCENT accounts for this tranche of notes will be applied to pay principal of and [interest][accreted discount] on this tranche of notes. Then, in each following month until a sale of receivables for the Class [    ]([    ]-[    ]) notes occurs, the principal amounts and finance charge amounts will be deposited into the applicable DCENT accounts, and applied to make monthly payment of principal and [interest][accreted discount] on this tranche of notes until the legal maturity date of the Class [    ]([    ]-[    ]) notes. [For Class B and Class C: You generally will receive payment of principal of your notes only if and to the extent that, after giving effect to that payment, the required subordination will be maintained for the senior classes of notes in that series.]

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Following an event of default and acceleration, holders of the affected notes will have the ability to direct a sale of credit card receivables held by the master trust only under the limited circumstances described in “The Notes — Events of Default,” “—Remedies Following an Event of Default” and “Sources of Funds to Pay the Notes — Sale of Receivables.” In particular, following an event of default and acceleration relating to subordinated notes, if the indenture trustee or a majority of the noteholders of the affected tranche directs the master trust to sell credit card receivables, the sale will occur only if, after giving effect to that payment, the required subordination will be maintained for the senior notes in the DiscoverSeries by the remaining notes (including as a result of prefunding the senior notes) or if such sale occurs on the legal maturity date. However, if principal of or [interest][accreted discount] on the Class [    ]([    ]-[    ]) notes has not been paid in full on its legal maturity date, the sale will automatically take place on that date [For Class B and Class C: regardless of the subordination requirements of any senior classes of notes].

Even if a sale of receivables occurs, we cannot assure you that the proceeds of the sale will be enough to pay unpaid principal of and [interest][accreted discount] on the accelerated notes.

Certain Regulatory Matters

If the appropriate federal or state banking regulatory authorities, whether in connection with the appointment of a receiver or conservator or otherwise, were to find that any of the receivables sale and contribution agreement, the pooling and servicing agreement, the series supplement for the collateral certificate, the indenture, indenture supplement and terms document for the notes, or any other agreement or contract of Discover Bank, the depositor, the master trust or the note issuance trust, or the performance of any obligation under such an agreement or contract, constitutes an unsafe or unsound practice or violates any law, rule, regulation, or written condition or agreement applicable to Discover Bank, that banking regulatory authority has the power to order Discover Bank, among other things, to rescind that agreement or contract, refuse to perform that obligation, terminate that activity, or take such other action as that banking regulatory authority determines to be appropriate. Discover Bank may not be liable to you, the depositor, the master trust or the note issuance trust for contractual damages for complying with any orders issued by such banking regulatory authority and you, the depositor, the master trust or the note issuance trust may not have any recourse against the applicable banking regulatory authority. While we have no reason to believe that any banking regulatory authority would make such a finding about Discover Bank or the depositor or the operation of the master trust or the note issuance trust and while Discover Bank is currently well-capitalized and thus does not believe that a banking regulatory authority would have reason to take action against Discover Bank, there can be no assurance that a banking regulatory authority in the future would not conclude otherwise. If a banking regulatory authority did reach such a conclusion and ordered Discover Bank to rescind or amend the receivables sale and contribution agreement, the pooling and servicing agreement, any series supplement, the indenture, any indenture supplement, or any terms documents, or to stop extending credit on some or all of the accounts designated as part of the master trust, payments to you could be delayed or reduced. For more information about the enforcement powers of banking regulatory authorities as they may relate to Discover Bank and actions such authorities have taken in the past with respect to other financial institutions, see “The Originator and Sponsor — Certain Regulatory Matters.”

Moreover, in July 2010 President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). The Dodd-Frank Act contains a comprehensive set of provisions designed to govern the practices and oversight of financial institutions and other participants in the financial markets, including Discover Bank. The Dodd-Frank Act also established a financial industry regulator, the Consumer Financial Protection Bureau (the “CFPB”). The CFPB is authorized to prevent “unfair, deceptive or abusive acts or practices” and ensure consistent enforcement of laws so that all consumers have access to markets for consumer financial products and services that are fair, transparent and competitive. The CFPB has rulemaking and interpretive authority under the Dodd-Frank Act and other federal consumer financial services laws, as well as broad supervisory, examination and enforcement authority over large providers of consumer financial products and services, such as Discover Bank.

The evolving regulatory environment causes uncertainty with respect to the manner in which Discover Bank and its affiliates conduct their businesses and may potentially increase the risk that Discover Bank and its affiliates may be subject to criticism or enforcement action by their banking regulators. Banking regulators have introduced and continue to introduce new regulations, supervisory guidance and enforcement actions. Discover

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Bank is unable to predict the nature, extent or impact of any additional changes to statutes or regulations, including the interpretation, implementation or enforcement thereof, which may occur in the future. The impact that the regulatory environment ultimately has on Discover Bank’s business and operations will depend upon final implementing regulations, the actions of competitors and the behavior of consumers and other marketplace participants. See “Risk Factors — Deteriorations in Master Trust Performance or Receivables Balance; Possible Early Redemption Event — (5) Consumer Protection Laws and Regulations” and “—(6) Legislative and Regulatory Initiatives.”

[For Class B and Class C: Class [B][C] Notes are Subordinated and Bear Losses before Class A [For Class C: and Class B] Notes]

[[For Class B: The Class B([    ]-[    ]) notes are subordinated in right of payment of principal and interest to the Class A notes of the DiscoverSeries, bear losses before the Class A notes of the DiscoverSeries and provide loss protection to the Class A notes of the DiscoverSeries. Although the amount of loss protection provided by these notes is limited to their proportionate share of the required subordinated amounts of Class B notes for the Class A notes of the DiscoverSeries and may vary over time, at any time it is possible that the entire nominal liquidation amount of the Class B([    ]-[    ]) notes will provide loss protection to the Class A notes of the DiscoverSeries. The note issuance trust may issue additional senior notes from time to time that increase the extent to which the Class B([_]-[_]) notes are subordinated, and you will have no right to consent to, or object to, any such issuance of senior notes.]

[For Class C: The Class C([    ]-[    ]) notes are subordinated in right of payment of principal and interest to the Class A and Class B notes of the DiscoverSeries, bear losses before the Class A and Class B notes of the DiscoverSeries and provide loss protection to the Class A and Class B notes of the DiscoverSeries. Although the amount of loss protection provided by these notes is limited to their proportionate share of the required subordinated amounts of Class C notes for the Class A and Class B notes of the DiscoverSeries and may vary over time, at any time it is possible that the entire nominal liquidation amount of the Class C([    ]-[    ]) notes will provide loss protection to the Class A and Class B notes of the DiscoverSeries. The note issuance trust may issue additional senior notes from time to time that increase the extent to which the Class C([    ]-[    ]) notes are subordinated, and you will have no right to consent to, or object to, any such issuance of senior notes.]

The note issuance trust uses series finance charge amounts first to pay interest, swap payments and accreted discount for Class A, next to pay interest, swap payments and accreted discount for Class B, next to pay interest, swap payments and accreted discount for Class C, next to pay servicing fees on the collateral certificate and then to pay interest, swap payments and accreted discount for Class D. If series finance charge amounts are not sufficient to pay interest, swap payments and accreted discount on all classes of notes, subordinated notes may not receive full payments of such amounts if finance charge collections, interchange and, if so specified in the series supplement for such other certificates or notes, principal reallocated to the DiscoverSeries from other series of the master trust certificates and other series of notes and, with respect to the Class C notes and Class D notes, amounts on deposit in the applicable Class C reserve subaccount and amounts on deposit in the applicable Class D reserve subaccount are insufficient to cover the shortfall.

The note issuance trust may reallocate series principal amounts that would otherwise be allocable to these notes to pay interest on more senior classes of notes of the DiscoverSeries and to pay a portion of the master trust servicing fee allocable to the collateral certificate to the extent series finance charge amounts are insufficient to make those payments. If the note issuance trust uses series principal amounts that were allocated to your notes in this way, it will reduce the nominal liquidation amount of your tranche by a corresponding amount.] In addition, the master trust allocates charged-off receivables to the collateral certificate, and if the note issuance trust cannot reimburse those charged-off receivables using series finance charge amounts, finance charge collections and interchange reallocated to DCENT from any other series of master trust certificates and other series of notes, or with respect to the Class C notes or Class D notes, amounts on deposit in the applicable Class C reserve subaccount or Class D reserve subaccount, if any, the resulting losses will generally be borne first by the Class D notes of the DiscoverSeries, then by the Class C notes, then by the Class B notes, and finally by the Class A notes. These losses due to charged-off receivables will also reduce the nominal liquidation amounts of the tranche of notes to which they are allocated. If any reduction in the nominal liquidation amount of your tranche is not reimbursed in a subsequent month from series finance charge amounts and reallocated finance charge collections and interchange

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from any other series of master trust certificates and other series of notes, you may not receive repayment of the full stated principal amount of your notes. See “The Notes — Stated Principal Amount, Outstanding Dollar Principal Amount, Adjusted Outstanding Dollar Principal Amount and Nominal Liquidation Amount — Nominal Liquidation Amount” and “Deposits and Allocation of Funds for DiscoverSeries Notes — Application of Series Principal Amounts.”

In addition, after the note issuance trust applies series principal amounts allocated to subordinate notes to pay shortfalls in interest on senior classes of notes or to pay any shortfalls in servicing fees allocable to the collateral certificate, remaining series principal amounts and any principal amounts reallocated to the DiscoverSeries from any other series of master trust certificates and other series of notes are used first to pay or prefund principal for the Class A notes, next to pay or prefund principal for the Class B notes, next to pay or prefund principal for the Class C notes, and then to pay principal for the Class D notes.]

[For Class B and Class C: Subordination Provisions May Delay Repayments for your Notes]

[Subordinated notes, including the Class [    ]([    ]-[    ]) notes, except as noted in the following paragraph, will be paid principal only to the extent that sufficient funds are available, such notes are not needed to provide the required subordination for senior classes of notes of the DiscoverSeries and the usage of the available subordinated amount of notes of that class is zero. In addition, series principal amounts allocated to the Class [B][C] notes will be applied first to pay shortfalls in interest on senior classes of notes, then to pay any shortfalls in servicing fees allocable to the DiscoverSeries, and then to make targeted deposits to the principal funding subaccounts for senior classes of notes, including prefunding deposits, before being applied to make targeted deposits to the principal funding subaccount for the Class [B][C] notes. Principal amounts reallocated to the DiscoverSeries from other series of master trust certificates or other series of notes will also be applied to make targeted deposits to the principal funding subaccounts of senior classes of notes, including prefunding deposits, before being applied to make targeted deposits to the principal funding subaccounts of subordinated notes. If your Class [    ]([    ]-[    ]) notes reach their expected maturity date, or an early redemption event or an event of default and acceleration occurs and is continuing prior to the legal maturity date for the Class [    ]([    ]-[    ]) notes, and they cannot be paid because they are needed to provide the required subordination for senior classes of notes of the DiscoverSeries, DCENT will begin to prefund the principal funding subaccounts for those senior notes, as described in “Deposits and Allocation of Funds for DiscoverSeries Notes — Prefunding.” No series principal amounts will be deposited into the principal funding subaccount of, or used to make principal payments on, the Class [    ]([    ]-[    ]) notes until:

This may result in a delay to, or reduction to or loss of, principal payments to holders of the Class [    ]([    ]-[    ]) notes. Your notes will continue to provide credit enhancement to senior notes, and will continue to be exposed to losses relating to charged-off receivables, during any period in which they cannot be repaid as a result of these subordination provisions. We cannot assure you that there will be enough other subordinated notes of your class or that DCENT will be able to issue replacement notes as necessary to permit repayment of your notes on their expected maturity dates. It will not be an event of default if your notes are not repaid on their expected maturity date.

If the Class [    ]([    ]-[    ]) notes reach their legal maturity date and their outstanding dollar principal amount has not been paid in full, a portion of the receivables supporting the collateral certificate will be sold to make the final payment on the Class [    ]([    ]-[    ]) notes. See “Sources of Funds to Pay the Notes — Sale of Receivables.”]

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[For Class C: Limited Credit Enhancement through Class C Reserve Subaccount]

[For Class C: The credit enhancement for the Class C([    ]-[    ]) notes provided through the Class C reserve subaccount for your tranche is limited by the amount on deposit in the applicable Class C reserve subaccount and the maximum amount that can be on deposit in that subaccount. Initially, [the Class C([    ]-[    ]) reserve subaccount will not be funded][will be funded by a deposit of $[●]]. DCENT will only [commence making][make additional] deposits into the Class C([    ]-[    ]) reserve subaccounts from series finance charge amounts, or increase the targeted deposits, if the three-month rolling average excess spread percentage for the DiscoverSeries falls below the percentages set forth in the table under “Prospectus Summary — Credit Enhancement — Class C Reserve Account” in this prospectus.

However, Discover Funding LLC cannot assure you that DCENT will be able to deposit the entire targeted amount on any distribution date into the applicable Class C reserve subaccount from series finance charge amounts. If DCENT has not deposited the entire targeted amount for a tranche at the time of an economic early redemption event for the DiscoverSeries, especially as a result of a sudden or rapid decline in excess spread for the DiscoverSeries, the available credit enhancement provided by the applicable Class C reserve subaccount may not be sufficient to make up any shortfalls in interest or principal on the applicable Class C notes or to reimburse any losses allocated to such notes as a result of charged-off receivables or the application of the series principal amounts allocated to them to pay interest on senior notes or to pay servicing fees. Further, even if DCENT has been able to deposit the entire targeted amount before an early redemption event, the targeted amount may not be sufficient to make up any shortfalls in interest or principal on the applicable tranche of Class C notes or to reimburse any losses allocated to your notes as a result of charged-off receivables or the application of the series principal amounts allocated to them to pay interest on senior notes or to pay servicing fees. If you own Class C notes and all of your credit enhancement has been used, you will bear directly the credit and other risks associated with your investment in the notes.]

[Increased Regulatory Oversight and Changes In The Method Pursuant to Which The LIBOR Rates Are Determined May Adversely Affect The Value of The Notes]

[Beginning in 2008, concerns were raised that some of the member banks surveyed by the British Bankers’ Association (the “BBA”) in connection with the calculation of LIBOR across a range of maturities and currencies may have been under-reporting or otherwise manipulating the inter-bank lending rate applicable to them. A number of BBA member banks have entered into settlements with their regulators and law enforcement agencies with respect to alleged manipulation of LIBOR, and investigations were instigated by regulators and governmental authorities in various jurisdictions (including in the United States, United Kingdom, European Union, Japan and Canada). If manipulation of LIBOR or another inter-bank lending rate occurred, it may have resulted in that rate being artificially lower (or higher) than it otherwise would have been.

In September 2012, the U.K. government published the results of its review of LIBOR (commonly referred to as the “Wheatley Review”). The Wheatley Review made a number of recommendations for changes with respect to LIBOR including the introduction of statutory regulation of LIBOR, the transfer of responsibility for LIBOR from the BBA to an independent administrator, changes to the method of compilation of lending rates and new regulatory oversight and enforcement mechanisms for rate-setting. Based on the Wheatley Review, final rules for the regulation and supervision of LIBOR by the Financial Conduct Authority (the “FCA”) were published and came into effect on April 2, 2013 (the “FCA Rules”). In particular, the FCA Rules include requirements that (1) an independent LIBOR administrator monitor and survey LIBOR submissions to identify breaches of practice standards and/or potentially manipulative behavior, and (2) firms submitting data to LIBOR establish and maintain a clear conflicts of interest policy and appropriate systems and controls. In addition, in response to the Wheatley Review recommendations, ICE Benchmark Administration Limited (the “ICE Administration”) has been appointed as the independent LIBOR administrator, effective February 1, 2014.

It is not possible to predict the effect of the FCA Rules, any changes in the methods pursuant to which the LIBOR rates are determined and any other reforms to LIBOR that will be enacted in the U.K. and elsewhere, which may adversely affect the trading market for LIBOR-based securities. In addition, any changes announced by the FCA, the ICE Administration or any other successor governance or oversight body, or future changes adopted by such body, in the method pursuant to which the LIBOR rates are determined may result in a sudden or prolonged increase or decrease in the reported LIBOR rates. If that were to occur and to the extent that the value of the Class [    ]([    ]-[    ]) notes is affected by reported LIBOR rates, the level of interest payments and the value of the notes may be affected. Further, uncertainty as to the extent and manner in which the Wheatley Review recommendations will continue to be adopted and the timing of such changes may adversely affect the current trading market for LIBOR-based securities and the value of the Class [    ]([    ]-[    ]) notes.]

[Limited Subordination; Possible Loss of Subordination]

[For Class A: The credit enhancement for the Class A([    ]-[    ]) notes from the Class B notes, the Class C notes and the Class D notes is limited by the available subordinated amount of Class B notes, the available subordinated amount of Class C notes and the available subordinated amount of Class D notes for these notes, which is the applicable required subordinated amount of such subordinated notes minus usage of those subordinated notes. If you own a note and all of your credit enhancement has been used, you will bear directly the credit and other risks associated with your investment in the notes.]

[For Class B: The credit enhancement for the Class B([    ]-[    ]) notes from the Class C notes and the Class D notes is limited by the available subordinated amount of Class C notes and the available subordinated amount of Class D notes for these notes, which is the applicable required subordinated amount of such subordinated notes minus usage of those subordinated notes. If you own a note and all of your credit enhancement has been used, you will bear directly the credit and other risks associated with your investment in the notes.]

[For Class C: The credit enhancement for the Class C([    ]-[    ]) notes from the Class D notes is limited by the available subordinated amount of Class D notes for these notes, which is the applicable required subordinated amount of such subordinated notes minus usage of those subordinated notes. If you own a note and all of your credit enhancement has been used, you will bear directly the credit and other risks associated with your investment in the notes.]

[For Class A and Class B: Subordinated notes may have expected maturity dates and legal maturity dates earlier than the expected maturity date or legal maturity date for the Class [    ]([    ]-[    ]) notes.

If notes of a subordinated class reach their expected maturity date at a time when they are needed to provide the required subordination for the Class [A][B] notes and no additional subordinated notes are issued, prefunding of the Class [A][B] notes will begin and such subordinated notes will not be paid on their expected maturity date. The targeted prefunding amounts for the principal funding subaccounts for the Class [A][B] notes will be based on the amount necessary to permit the payment of those subordinated notes while maintaining the required subordination for the portion of Class [A][B] notes that have not been prefunded. See “Deposits and Allocation of Funds for DiscoverSeries Notes — Prefunding.”

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Subordinated notes that have reached their expected maturity date will not be paid until the remaining subordinated notes provide the required subordination for the Class A [and Class B] notes, which payment may be delayed further as other subordinated notes reach their expected maturity dates. The subordinated notes will be paid on their legal maturity date, to the extent that any funds are available for that purpose from proceeds of the sale of receivables or otherwise allocable to the subordinated notes, whether or not the Class A [and Class B] notes have been fully prefunded.

If DCENT does not receive sufficient series principal amounts during this prefunding period, your notes may not be fully prefunded before the legal maturity date of the subordinated notes. In that event, to the extent not fully prefunded, your notes would not have the required subordination beginning on the legal maturity date of those subordinated notes. This will not be cured until additional subordinated notes are issued, sufficient series principal amounts have been allocated for prefunding or a sufficient amount of Class A [and Class B] notes have matured so that the remaining outstanding subordinated notes provide the necessary subordination.]]

[Possible Changes in Required Subordination Percentage and Other Provisions]

[The percentages used in, or the method of calculating, the required subordinated amounts for the Class [    ]([    ]-[    ]) notes may change without your consent or the consent of any other noteholders if each applicable note rating agency hired by the issuer confirms that the change will not cause a reduction or qualification with negative implications of the ratings of any outstanding tranche of DiscoverSeries notes, in each case below the required ratings (after giving effect to such negative implications), or a withdrawal of any such ratings. In addition, the percentages used in, or the method of calculating, the required subordinated amount of any tranche of DiscoverSeries notes, including other tranches in the same class, may be different than the percentages used in, or the method of calculating, the required subordinated amount for the Class [    ]([    ]-[    ]) notes. In addition, the note issuance trust, without the consent of any noteholders, may utilize forms of credit enhancement other than subordinated notes to provide the Class [    ]([    ]-[    ]) notes with the required credit enhancement, if the applicable note rating agencies hired by the issuer confirm that the change will not cause a reduction or qualification with negative implications of the ratings of any outstanding tranche of DiscoverSeries notes, in each case below the required ratings (after giving effect to such negative implications), or a withdrawal of any such ratings.

The note issuance trust, without the consent of any noteholders, may change provisions that cause the master trust to allocate finance charge collections to the collateral certificate based on an investor interest in receivables that does not reflect unscheduled principal payments after an early redemption event or an event of default, if each applicable note rating agency hired by the issuer confirms that the change will not cause a reduction or qualification with negative implications of the ratings of any outstanding tranche of DiscoverSeries notes, in each case below the required ratings (after giving effect to such negative implications), or a withdrawal of any such ratings.]

Ratings of the Notes May Be Lowered or Withdrawn, and Unsolicited Ratings May Be Lower Than Any Ratings Issued by Rating Agencies Hired by Discover Bank to Rate the Notes

A rating is not a recommendation to purchase, hold or sell the Class [    ]([    ]-[    ]) notes. Ratings of the notes address the likelihood of timely payment of interest and ultimate payment of principal on the notes pursuant to their terms. Thus, there is no assurance that a rating assigned to the Class [    ]([    ]-[    ]) notes on the date on which such note is originally issued will not be lowered or withdrawn by a rating agency if in its judgment circumstances (including, without limitation, as a result of losses on the related receivables in excess of the levels contemplated by the rating agency at the time of its initial rating analysis) in the future so warrant. The rating agencies hired by Discover Bank to rate the Class [    ]([    ]-[    ]) notes may have a conflict of interest because Discover Bank has paid the fee charged by the rating agency for rating the notes.

In addition, rating agencies that have not been hired by Discover Bank to rate the Class [    ]([    ]-[    ]) notes will have access to the same information provided by Discover Bank to any rating agencies it has hired and may provide an unsolicited rating that differs from or is lower than the rating provided by the rating agencies Discover Bank has hired to rate the notes. The issuance of such a lower rating may adversely affect the market value or liquidity of the Class [    ]([    ]-[    ]) notes.

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The SEC adopted credit rating agency reform regulations on August 27, 2014 that, when effective, will impose significant new regulatory requirements on NRSROs, and will change many aspects of the ways NRSROs review and disseminate credit ratings. Market participants are still reviewing the new rules to assess possible impacts on rated obligations such as the Class [    ]([    ]-[    ]) notes, including the possibility that rating agency confirmations may be more expensive and more difficult to obtain; or that ratings may be subject to more frequent reviews and revisions that may increase their volatility.

Certain of the rating agencies have indicated that their ratings on the Class [    ]([    ]-[    ]) notes could potentially be affected by a change in the corporate structure or rating of Discover Bank even without a change in the quality or performance of the receivables in the master trust. We cannot assure you that no such corporate structure or rating change will occur before the Class [    ]([    ]-[    ]) notes mature. If Discover Bank is not able to satisfy rating agency requirements, such as completing certain credit enhancement actions requested by the rating agencies, to maintain the ratings of asset-backed securities issued by the master trust and the note issuance trust, it could limit Discover Bank’s ability to access the securitization markets. Additional factors affecting the extent to which Discover Bank will securitize its credit card receivables in the future include the overall credit quality of the receivables, the costs of securitizing the receivables and the legal, regulatory, accounting and tax requirements governing securitization transactions. A prolonged inability to securitize receivables may have a material adverse effect on Discover Bank’s liquidity, cost of funds and overall financial condition.

Deteriorations in Master Trust Performance or Receivables Balance; Possible Early Redemption Event

If certain measures of excess cash flow for the DiscoverSeries notes, and the group of master trust series to which the collateral certificate belongs are less than zero on a three-month rolling average basis, an excess spread early redemption event for the DiscoverSeries will occur. (If such an event occurs because of the introduction of, or any change in, interpretation of a law, regulation or accounting guideline and any such measure of excess spread on a one-month basis is restored to a specified level on an annualized percentage basis, the excess spread early redemption event may be cured and early redemption of the notes may terminate, as described under “—Effects of an Early Redemption Event or Event of Default; Excess Spread Early Redemption Cure.”) If the level of receivables in the master trust declines because customers generate fewer new receivables on their accounts, and Discover Funding LLC cannot add enough receivables from other accounts or interests in other pools of credit card receivables to maintain the required minimum level of receivables in the master trust, an amortization event will also occur with respect to the collateral certificate, which constitutes an early redemption event with respect to the note issuance trust.

[The Class [    ]([    ]-[    ]) notes, which receive the benefit of a derivative agreement, may not be redeemed earlier than the expected maturity date of this tranche of notes notwithstanding the occurrence of one of these events. The note issuance trust will nonetheless begin to fund the principal funding subaccount for this tranche during any period that such early redemption event is occurring but shall retain such funds on behalf of the noteholders until such expected maturity date. For the Class [    ]([    ]-[    ]) notes, if such event is subsequently cured, amounts so deposited may be reinvested in the collateral certificate.]

The following factors could cause master trust and collateral certificate performance to deteriorate, excess cash flow for the DiscoverSeries notes to decrease, or the receivables balance in the master trust to decline:

(1) Discover Bank May Change Terms of the Accounts

Discover Bank transfers receivables, but not accounts, to the depositor which, in turn, transfers the receivables to the master trust. As owner of any account, Discover Bank has the right to determine the rate for periodic finance charges, to alter the account’s minimum required monthly payment, to change the account’s credit limit and to change various other account terms. If periodic finance charges or other fees decrease, the master trust’s finance charge collections and the effective yield on the receivables could also decrease. In addition, if Discover Bank increases credit limits on accounts, charged-off amounts might increase and the levels of receivables in the master trust and in the Discover card portfolio might decrease. Certain types of Discover cards may offer customers credit limits that may be substantially higher, and impose periodic finance charges that in some cases are lower, than those available with other types of Discover cards.

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Except as described in this paragraph, the receivables sale and contribution agreement does not restrict Discover Bank’s ability to change the terms of accounts or receivables. The pooling and servicing agreement, the indenture and other DCENT agreements also do not restrict Discover Bank’s ability to change the terms of accounts or receivables. Discover Bank may decide, because of changes in the marketplace or applicable laws, or as a prudent business practice, to change the terms of some or all of its Discover card accounts. Provisions of the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (the “CARD Act”) include restrictions on the ability to increase interest rates on accounts, as more fully described in “—(6) Legislative and Regulatory Initiatives.” Discover Bank may not change the terms governing an account that has been designated to the master trust unless it changes the terms of its other accounts of the same general type or it changes the terms for all customers who reside in a particular affected state or similar jurisdiction. Changes to account terms may not, however, affect the accounts that have been designated to the master trust to the same degree as they affect Discover Bank’s other accounts. Originators selling receivables to Discover Funding LLC other than Discover Bank will be able to change account terms in the same circumstances and subject to the same limitations as Discover Bank.

(2) Interest on the Receivables and Interest on the Notes Accrue at Different Rates

Some of the receivables in the master trust will accrue periodic finance charges at the prevailing prime rate plus a margin, while the Class [    ]([    ]-[    ]) notes accrue interest at rates that [float against [LIBOR][EURIBOR][other index]][are fixed]. Changes in the prime rate may result in a higher or lower spread between the amount of finance charge collections on the receivables and the amount of interest payable on your notes and other amounts required to be funded out of finance charge collections allocated to the collateral certificate. [For Fixed Rate Notes: An investment in fixed-rate notes involves the risk that subsequent changes in market interest rates may adversely affect the value of the fixed rate notes.] [For Floating Rate Notes: Changes in [LIBOR][EURIBOR][other index] might not be reflected in the prime rate.]

[For Floating Rate Notes: Similarly, some of the receivables in the master trust will accrue periodic finance charges at fixed rates, while the Class [    ]([    ]-[    ]) notes accrue interest at rates that float against [LIBOR][EURIBOR][other index]. If [LIBOR][EURIBOR][other index] increases, the interest payments on your notes and other amounts required to be funded out of finance charge collections will increase, while the amount of finance charge collections on these receivables will remain the same unless and until Discover Bank resets the fixed rates on the accounts.]

(3) Payments, Generation of Receivables and Maturity

Customers may pay the receivables at any time and in any pattern, and they may decide not to create additional receivables in their accounts. In some cases, Discover Bank may also close customers’ accounts so they cannot incur new charges. Customers’ credit use and payment patterns may change because of many social, legal and economic factors, including the rate of inflation and relative interest rates offered for various types of loans, and legislative change. Discover Bank’s ability to compete in the credit card industry at any point in time will affect how customers pay existing receivables and how they generate new receivables that Discover Bank can convey to the depositor for subsequent transfer by the depositor to the master trust. Generation of fewer receivables will likely reduce the amount of interchange allocable to the master trust. In addition, if convenience use increases — more customers pay their balances within the grace period to avoid all finance charges on purchases of merchandise and services — then the effective yield on the receivables in the master trust might decrease. Conversely, the terms governing the accounts require only a minimum monthly payment, and if customers repay a smaller percentage of their balances than they currently repay each month, the master trust may not be able to make sufficient distributions on the collateral certificate to allow DCENT to make scheduled principal payments to you on a timely basis.

A customer’s ability to repay Discover Bank can be negatively impacted by increases in payment obligations to other lenders under mortgage, credit card and other consumer loans. Such changes can result from increases in base lending rates or structured increases in payment obligations, and could reduce the ability of Discover Bank’s customers to meet their payment obligations to other lenders and to Discover Bank. In addition, a customer’s ability to repay Discover Bank can be negatively impacted by the restricted availability of credit to consumers generally, including reduced and closed lines of credit. Customers with insufficient cash flow to fund daily living expenses and lack of access to other sources of credit may be more likely to increase their card usage

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and ultimately default on their payment obligations to Discover Bank, resulting in higher credit losses in Discover Bank’s portfolio. Discover Bank’s collection operations may not compete effectively to secure more of customers’ diminished cash flow than its competitors. In addition, Discover Bank may not identify customers who are likely to default on their payment obligations quickly and reduce its exposure by closing credit lines and restricting authorizations, which could adversely impact Discover Bank’s financial condition and results of operations. Discover Bank’s ability to manage credit risk also may be adversely affected by legal or regulatory changes (such as restrictions on collections, bankruptcy laws, minimum payment regulations and re-age guidance), competitors’ actions and consumer behavior, as well as inadequate collections staffing, techniques and models.

Heightened levels of consumer debt, large numbers of personal bankruptcies, or a weakened national or regional economy may cause increases in delinquencies in, and charge-offs of, the receivables in the master trust. For example, certain regional events, such as hurricanes that strike coastal regions, may negatively affect levels of receivables, related interest and fee revenue of the accounts in the master trust arising from such affected region. For geographic information regarding receivables in the master trust, see “The Master Trust — The Master Trust Accounts — Current Composition and Distribution of the Master Trust Accounts.” Moreover, terrorist acts against the United States or other nations, the commencement of hostilities between the United States and a foreign nation or nations or natural disasters could have a direct impact on the timing and amount of payments on your notes. Credit quality, customer behavior and other factors, including Discover Bank’s ability to waive or change fee terms, may decrease fees. Any delay in DCENT’s payment of principal with respect to your notes will extend the period during which charged-off receivables may be allocated to your notes.

(4) Competition in the Credit Card Industry

The credit card industry in which the Discover card competes is highly competitive. Competition in the credit card industry affects Discover Bank’s ability to obtain applicants for Discover card accounts, to encourage customers to use accounts and, through its arrangement with DFS Services LLC, to persuade service establishments to accept the Discover card. If Discover Bank does not compete successfully in these areas, the level of receivables transferred to the depositor and subsequently to the master trust and in the Discover card portfolio may decline. Lower transaction volume for the Discover card portfolio may also lead to a decline in interchange allocated to the master trust.

Competition in the credit card industry focuses on a number of factors, including brand, reputation, customer service, product offerings, incentives, pricing and other terms. Discover Bank’s credit card business also competes on the basis of reward programs and merchant acceptance. In particular, competition based on cash rewards programs has increased in the past two years. In addition, the heightened focus by merchants on the fees charged by credit card networks, together with the Dodd-Frank Act and recent U.S. Department of Justice settlements with Visa and MasterCard, which would allow merchants to encourage customers to use other payment methods or cards and may increase merchant surcharging, could lead to reduced transactions on, or merchant acceptance of, Discover cards or reduced fees. Actual or perceived limitations on acceptance of credit cards issued by Discover Bank could adversely affect the use of Discover cards by existing customers and the attractiveness of the Discover card to prospective customers. Also, Discover Bank may have difficulty attracting and retaining network partners if we are unable to add or retain acquirers or merchants who accept Discover cards. As a result of these factors, a reduction in the number of Discover Bank’s merchants or the rates they pay could materially adversely affect Discover Bank’s business, financial condition, results of operations and cash flows.

There is also increased competition related to new technologies being utilized in the credit card industry, including the ability to access accounts and make payments via mobile devices. The market includes:

Although Discover Bank has increasingly offered its customers other lending products, including personal and student loans, some of Discover Bank’s competitors offer a wider variety of loan products than Discover Bank does, which may position them better among customers who prefer to use a single financial institution to meet all of their financial needs. There has been a trend toward consolidation among credit card issuers, leading to greater concentration of resources. Some of Discover Bank’s competitors enjoy greater capital resources than Discover Bank does, and are therefore able to invest more in initiatives to attract and retain customers, such as advertising, targeted marketing, account acquisitions and pricing competition in interest rates, annual fees, reward programs and low-priced balance transfer programs. In addition, if Discover Bank is unable to maintain sufficient network functionality to be competitive with other networks, or if our competitors develop better data security solutions or more innovative products and services than we do, our ability to retain and attract network partners and maintain or increase the revenues generated by our card issuing business may be materially adversely affected. Additionally, competitors may develop data security solutions which, as a consequence of the competitors’ market power, we may be forced to use. As a result, those competitors could subject Discover Bank to adverse restrictions and Discover Bank’s business may be adversely affected.

The significant majority of the bank-issued credit cards bear the Visa or MasterCard service mark and are issued by the many banks that participate in one or both of the national bank card networks operated by Visa U.S.A., Inc. and MasterCard Worldwide. Since October 2004, financial institutions have been permitted to issue credit cards on the national network maintained by DFS Services LLC (the “Discover^® Network”); however, these credit cards may compete with credit cards issued by Discover Bank. The Visa and MasterCard networks have been in existence for more than 40 years. Cards bearing their service marks have worldwide acceptance by merchants of goods and

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services and recognition by consumers and the general public. Co-branded credit cards, which offer the cardmember certain benefits relating to the industrial, retail or other business of the bank’s co-branding partner, such as credits towards purchases of airline tickets or rebates for the purchase of an automobile, and affinity cards, which give cardmembers the opportunity to support and affiliate with the affinity partner’s organization and often provide other benefits, both currently represent a large segment of the bank-issued credit card market. American Express Company, which has been issuing cards since 1958, issues the majority of travel and entertainment cards. Travel and entertainment cards differ in many cases from bank cards in that they generally have no pre-established credit limits and have limited provisions for repayments in installments. The Discover card, which Discover Bank introduced nationwide in 1986, competes with general purpose credit cards issued by other banks and with travel and entertainment cards. Discover Bank continues to add new cards and card products to its offerings, including new reward programs and other features.

(5) Consumer Protection Laws and Regulations

Discover Bank must comply with federal and state consumer protection laws, regulations and guidance in connection with making and enforcing consumer loans such as credit card loans, including the loans in the master trust. These laws, regulations and related guidance and applications or interpretations thereof, including any changes thereto, could adversely affect Discover Bank’s ability to generate new receivables, to collect on the receivables in the master trust or to maintain previous levels of monthly periodic finance charges. Federal laws include the Truth in Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Gramm-Leach-Bliley Act, the CARD Act and the Dodd-Frank Act. These and other federal laws, among other things, require disclosures of the cost of credit, provide substantive consumer rights, prohibit discrimination in credit transactions, regulate the use of credit report information, provide financial privacy protections, require safe and sound banking operations, prohibit unfair, deceptive and abusive trade practices, restrict Discover Bank’s ability to raise interest rates, and subject us to substantial regulatory oversight. State and, in some cases, local laws also may regulate in these areas, as well as in the areas of collection practices, and may provide other additional consumer protections. Moreover, Discover Bank is subject to the Servicemembers Civil Relief Act (the “SCRA”), which protects persons called to active military service and their dependents from undue hardship resulting from their military service. The SCRA applies to all debts incurred prior to the commencement of active duty (including credit card and other open-end debt) and limits the amount of interest, including service and renewal charges and any other fees or charges (other than bona fide insurance) that is related to the obligation or liability.

Further, the establishment of the CFPB under the Dodd-Frank Act may result in additional regulations that affect Discover Bank’s business and may change the implementation and enforcement of existing regulations. The CFPB is authorized to prevent “unfair, deceptive or abusive acts or practices” and ensure consistent enforcement of laws so that all consumers have access to markets for consumer financial products and services that are fair, transparent and competitive. The CFPB has rulemaking and interpretive authority under the Dodd-Frank Act and other federal consumer financial services laws (including the CARD Act), as well as broad supervisory, examination and enforcement authority over large providers of consumer financial products and services, such as Discover Bank. In addition, the CFPB has an online complaint system that allows consumers to log complaints with respect to the products Discover Bank offers. The system could inform future agency decisions with respect to regulatory, enforcement or examination focus. Several of Discover Bank’s products, including credit cards and student loans, are areas of focus by the CFPB. [The CFPB is currently investigating certain student loan servicing practices of Discover Bank.] If the CFPB determines to bring an enforcement action, it could include demands for civil money penalties, changes to certain of Discover Bank’s business practices and customer restitution. [Given that the CFPB is a relatively new agency and is continuing to develop its approaches to fulfilling its statutory mandate,] we cannot at this time predict the extent to which CFPB actions may affect Discover Bank or the consumer finance markets in which it operates.

Discover Bank can make no assurances about the outcome or impact of consumer protection laws, regulations and guidance or changes therein, on its financial position. If Discover Bank does not comply with these laws, regulations and guidance, it may not be able to collect the receivables. These laws, regulations and guidance will also apply to any other servicer of the receivables, with the same possible effects.

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In addition, when Discover Bank transfers receivables to Discover Funding LLC and Discover Funding LLC transfers receivables to the master trust, each of Discover Bank and Discover Funding LLC make certain representations and warranties to the related transferee, including, but not limited to, the following, that if:

all receivables in the affected accounts will be purchased from the master trust by Discover Funding LLC and subsequently from Discover Funding LLC by Discover Bank. Discover Bank does not anticipate that the trustee for the master trust will examine the receivables or the records relating to the receivables to determine whether they have legal defects or for any other purpose.

Discover Bank is subject to state and federal laws regarding the use and safeguarding of consumer information, including laws requiring consumer notification in the event of a data breach. Due to recent consumer data compromise events in the United States, which resulted in unauthorized access to payment card data of millions of customers, the United States has experienced a heightened legislative and regulatory focus on data security. Regulation of privacy, data use and security may cause an increase in the costs to issue payment cards and/or may decrease the number of cards that Discover Bank or third parties issue. New regulations in these areas may also increase the costs to comply with such regulations, which could materially adversely affect Discover Bank’s financial condition and results of operations. Failure to comply with the privacy and data use and security laws and regulations to which Discover Bank is subject, including by reason of inadvertent disclosure of confidential information, could result in fines, sanctions or other penalties and loss of consumer confidence, which could materially adversely affect Discover Bank’s reputation and ability to attract and retain customers.

(6) Legislative and Regulatory Initiatives

The financial services industry, in general, is heavily regulated. The Dodd-Frank Act has and will continue to significantly increase the regulation of the financial services industry, including through the creation of the CFPB and the imposition of increased prudential standards on systemically significant institutions, including Discover Bank and Discover Financial Services. Proposals for legislation further regulating the financial services industry are continually being introduced in the U.S. Congress and in state legislatures. Congress continues to consider extensive changes to the laws regulating financial services firms, including bills that address risks to the economy and the payments system through a variety of measures.

Legislation Addressing Credit Card Practices

The CARD Act was enacted in 2009. The CARD Act made numerous amendments to the Truth in Lending Act, requiring Discover Bank to make fundamental changes to many of its business practices, including marketing, underwriting, pricing and billing. The CARD Act’s restrictions on a lender’s ability to increase interest rates on existing balances to respond to market conditions and credit risk ultimately limits Discover Bank’s ability to extend credit to new customers and provide additional credit to current customers. Other CARD Act restrictions have resulted and will continue to result in reduced interest income and loan fee income.

As a result of the CARD Act and other consumer protection laws and regulations, it may be more difficult for Discover Bank or its affiliates to originate additional accounts because of the need to employ more restrictive underwriting and credit management procedures, or for the servicer to collect payments on the receivables. In addition, the finance charges and other fees that Discover Bank or its affiliates can charge on credit card account balances may be reduced. Account holders also may choose to use credit cards less frequently or for smaller amounts as a result of these consumer protection laws. Each of these results, independently or collectively, could reduce the effective yield of the accounts designated for the master trust and could, if large enough, result in an amortization event for the collateral certificate or an early redemption event for your notes. See “Certain Legal Matters Relating to the Receivables — Consumer Protection Laws and Debtor Relief Laws Applicable to the Receivables.”

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Other Credit Card Legislation

Congress may also consider other legislation affecting Discover Bank’s business. Examples include a ceiling on the rate of interest that can be charged on credit cards, restrictions on interchange fees on credit card transactions, and extending the provisions of the CARD Act to business cards.

Financial Regulatory Reform

The Dodd-Frank Act

The Dodd-Frank Act contains a comprehensive set of provisions designed to govern the practices and oversight of financial institutions and other participants in the financial markets. The Dodd-Frank Act, as well as other legislative and regulatory changes, could have a significant impact on Discover Bank by, for example, requiring Discover Bank to change certain of its business practices, requiring Discover Bank to meet more stringent capital, liquidity and leverage ratio requirements, limiting Discover Bank’s ability to pursue certain business opportunities, imposing additional costs on Discover Bank, limiting fees Discover Bank can charge for services, impacting the value of Discover Bank’s assets, or otherwise adversely affecting Discover Bank’s businesses. Such requirements may also be imposed on Discover Bank’s parent, Discover Financial Services, or its other affiliates.

The Dodd-Frank Act addresses risks to the economy and the payments system, especially those posed by large systemically significant financial firms. Under the Dodd-Frank Act, bank holding companies with $50 billion or more in total consolidated assets, including Discover Financial Services, are considered systemically significant and are subject to heightened prudential standards, including heightened capital, leverage, liquidity, credit exposure and risk management requirements and to other requirements to be established by the Federal Reserve. In July 2013, the Federal Reserve, FDIC and the Office of the Comptroller of the Currency (“OCC”) issued a final rule to implement the provisions of the Basel III regulatory capital reforms that is applicable to Discover Financial Services and Discover Bank. The final rule includes new minimum and “well-capitalized” risk-based capital and leverage ratios, which will be phased in from 2014 to 2019, and refines the definition of what constitutes “capital” for purposes of calculating those ratios. In September 2014, the Federal Reserve, the FDIC and OCC also issued a final rule to implement the Basel III liquidity coverage ratio requirements. Discover Financial Services and Discover Bank are still assessing the impact of these rules. Additionally, under the Dodd-Frank Act, Discover Financial Services is required to submit an annual capital plan for approval by the Federal Reserve. In January 2014, Discover Financial Services submitted its annual capital plan to be reviewed under the enhanced standards set forth in the Federal Reserve’s 2013 Comprehensive Capital Analysis and Review (“CCAR”) program. [Also beginning in 2014, Discover Financial Services is required to conduct capital stress tests twice per year. Under a similar FDIC rule, Discover Bank, as a state nonmember bank with $50 billion or more in assets, is required to comply with the same capital stress test requirements as CCAR bank holding companies such as Discover Financial Services. Also under Dodd-Frank, both Discover Financial Services and Discover Bank are required to submit to the bank regulatory agencies resolution plans or “living wills” on an annual basis. The initial resolution plans for Discover Financial Services and Discover Bank were submitted on December 31, 2013.]

The Dodd-Frank Act also provides for enhanced regulation of derivatives, restrictions on and additional disclosure of executive compensation, additional corporate governance requirements and more stringent requirements with respect to affiliate transactions, mergers and acquisitions, proprietary trading and investment in, and sponsorship of, hedge funds and private equity funds. The Dodd-Frank Act also grants broad new powers to the government to seize and conduct an orderly liquidation of failing systemically-important financial firms, including bank holding companies and other nonbank financial companies, and to recover the costs of such liquidations through assessments on large financial firms.

Effective July 2011, the Dodd-Frank Act requires a bank holding company that elects treatment as a financial holding company, such as Discover Financial Services, to be both well-capitalized and well-managed in addition to the existing requirement that a financial holding company’s subsidiary banks be well capitalized and well-managed. If Discover Financial Services were to fail to meet these requirements, Discover Bank could be restricted from engaging in new financial activities or acquisitions or be required to discontinue or divest existing activities that are not generally permissible for bank holding companies.

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In addition, the Dodd-Frank Act contains several provisions that could change the FDIC deposit insurance premiums paid by Discover Bank. Various other assessments and fees are also authorized in the legislation and others could be authorized in the future. The Dodd-Frank Act also requires the SEC to impose asset-level registration statement disclosure requirements if the data is necessary for investors to independently perform due diligence and prohibits conflicts of interest relating to securitizations. In August 2014, as discussed below, the SEC adopted final amendments to the disclosure requirements and offering process for registered asset-backed securities and also included certain changes that will affect both unregistered offerings and registered offerings of asset-backed securities as part of its rating agency reform rules. Although these final rules will not require asset-level data for the Discover Card securitization program, they may have significant effects on the way Discover issues new DiscoverSeries notes. [Discover Bank is still assessing these new rules.] Final rules prohibiting conflicts of interest relating to securitizations have not yet been adopted.

In December 2013, regulators finalized the rule implementing Section 619 of the Dodd-Frank Act, commonly referred to as the Volcker Rule, which contains certain prohibitions and restrictions on the ability of a banking entity and nonbank financial company supervised by the Federal Reserve to engage in proprietary trading and have certain interests in, or relationships with, a hedge fund or private equity fund. We do not believe the Volcker Rule will have a material impact on Discover Bank’s credit card securitization program, the depositor, the master trust, or the note issuance trust.

While many of the rules and regulations required by the Dodd-Frank Act have been enacted, many have yet to be promulgated, which could result in additional legislative or regulatory action. The effect of the Dodd-Frank Act and its implementing regulations on Discover Bank’s and its affiliates’ businesses and operations is subject to continued uncertainty and could be substantial. In addition, Discover Bank may be required to invest significant management time and resources to address the various provisions of the Dodd-Frank Act and the numerous regulations that are required to be issued under it. The Dodd-Frank Act, any related legislation and any implementing regulations could have a material adverse effect on Discover Bank’s business, results of operations and financial condition.

Securities and Exchange Commission

In August 2014, the SEC adopted revised rules for asset-backed securities offerings (“SEC Regulation AB II”) that substantially changed the disclosure, reporting and offering process for public offerings of asset-backed securities, including those offered under Discover Bank’s credit card securitization program. In its adopting release for SEC Regulation AB II, the SEC has indicated it may revisit certain proposals not reflected in the final rules, such as grouped data for credit card securitizations, in the future.

On August 31, 2011, the SEC issued an advance notice of proposed rulemaking relating to the exemptions the master trust and note issuance trust rely on to avoid registration as investment companies. At this time, we cannot predict what form the related proposed and final rules will take, or whether such rules would materially impact Discover Bank’s securitization program.

On October 21, 2014, the FDIC adopted regulations that would mandate a minimum five percent risk retention requirement for securitizations that are issued after December 24, 2016, the date which is two years after the regulations were published in the Federal Register. The SEC, the Federal Reserve and certain other banking regulators have also approved the risk retention regulations. [Discover Bank has not yet determined whether its existing forms of risk retention will satisfy the final regulatory requirements or whether structural changes will be necessary. Such risk retention requirements may impact the bank’s ability or desire to issue asset-backed securities in the future.] [See “The Originator and Sponsor — Credit Risk Retention” in this prospectus for information on how Discover Bank complies with these risk retention requirements.]

Also, Congress may move to further regulate holding companies that own depository institutions, such as Discover Bank, which could result in additional complexity and expense. Furthermore, various federal and state agencies and standard-setting bodies may, from time to time, enact new or amend existing accounting rules or standards that could impact the master trust’s performance or Discover Bank’s capital or capital requirements. See “—FDIC Rule Regarding Securitizations.”

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Addition of Accounts

Discover Funding LLC may, and in certain circumstances will be required to, designate additional accounts, the receivables in which will be transferred to the master trust. The allocable portion of interchange calculated by reference to net merchant sales on such accounts on and after the date of designation will also be assigned to the master trust. Discover Funding LLC may also designate interests in other pools of credit card receivables and interchange for inclusion in the master trust. The additional accounts may be Discover card accounts originated by Discover Bank or an affiliate of Discover Bank, and they may be newly originated accounts. If the accounts are not originated by Discover Bank, they may be serviced by their originator, and the risks discussed under the headings “—Security Interest Matters”, “Insolvency Related Matters” and “—Deteriorations in Master Trust Performance or Receivables Balance; Possible Early Redemption Event — Consumer Protection Laws and Regulations” will apply to the new originator and servicer to the same extent that they apply to Discover Bank. Because any additional accounts or accounts underlying interests in other pools of receivables may not be accounts of the same type as the accounts already included in the master trust, the additional accounts:

Addition of Other Collateral Certificates

The primary asset in DCENT is the collateral certificate. At any time, another collateral certificate may be added to DCENT. We cannot guarantee that additional collateral certificates, or credit card receivables in the related master trust, including additional accounts related to such additional collateral certificates will be of the same credit quality as the Series 2007-CC collateral certificate or the credit card receivables in the master trust. At all times, DCENT’s assets will consist primarily of collateral certificates backed by credit card receivables or, in limited circumstances in the future, of credit card receivables. The credit card receivables in the master trust will be generated by revolving credit card accounts owned by Discover Bank or its affiliates.

Discover Funding LLC may choose to transfer additional assets to DCENT. In addition, if an additional collateral certificate were transferred to DCENT, series principal amounts not allocated to noteholders and not required to pay interest on senior notes, to pay servicing fees or to be deposited to a principal funding subaccount for the benefit of noteholders, need not be reinvested in that collateral certificate, but instead may be (1) invested or reinvested in another collateral certificate included or to be included in DCENT or (2) paid to the depositor. Additional interests in receivables may be transferred to DCENT by increasing the investor interest in receivables represented by the existing collateral certificates held by DCENT, such as the Series 2007-CC collateral certificate,

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and additional collateral certificates may be transferred to DCENT without the payment of cash. New assets transferred to DCENT, either by designating them as note issuance trust assets or by reinvesting series principal amounts in such assets, may have characteristics, terms, conditions, cash flows and allocation percentages or methodologies that are different from those of the Series 2007-CC collateral certificate and may be of different credit quality due to differences in underwriting criteria and payment terms of the underlying receivables.

[Discover Bank, as servicer, will determine the reinvestment of collections on the assets held by DCENT over time. Reinvestment may result in increases or decreases in the relative amounts of different types of assets held by DCENT.] In addition, there is no obligation on the part of Discover Funding LLC to transfer additional assets to DCENT by increasing the investor interest in receivables represented by any collateral certificate. If the credit quality of DCENT’s assets were to deteriorate, your receipt of principal and interest payments may be reduced, delayed or accelerated. See “Risk Factors — Deteriorations in Master Trust Performance or Receivables Balance; Possible Early Redemption Event.”

Effects of an Early Redemption Event or Event of Default; Excess Spread Early Redemption Cure

If an early redemption event or event of default occurs with respect to the Class [    ]([    ]-[    ]) notes:

If an excess spread early redemption event for the Class [    ]([    ]-[    ]) notes occurs because of the introduction of, or any change in or change of interpretation of, a law, regulation or accounting guideline and any measure of excess spread on a one-month basis is restored to [4.50]% on an annualized percentage basis on any distribution date within 3 months following such excess spread early redemption event, unless another early redemption event or event of default for such tranche has occurred (other than another excess spread early redemption event), the excess spread early redemption event will be cured. In such case, although any amounts already allocated to the principal funding subaccount for the Class [    ]([    ]-[    ]) notes in connection with such excess spread early redemption event will be paid to the Class [    ]([    ]-[    ]) noteholders notwithstanding such cure, the early redemption for this tranche will terminate, and as a result:

However, if, within 3 months following an excess spread early redemption cure,

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the early redemption of the Class [    ]([    ]-[    ]) notes resumes and all allocations or calculations that are required to be based on the nominal liquidation amount of any tranche immediately prior to the occurrence of an early redemption event will be made as though the original excess spread early redemption event had occurred and such excess spread early redemption cure had not occurred.

Within 12 months following such excess spread early redemption cure, another excess spread early redemption cure may not occur, and an excess spread early redemption event will be incurable.

If an excess spread early redemption cure occurs with respect to the Class [    ]([    ]-[    ]) notes:

[Notwithstanding the foregoing, the Class [    ]([    ]-[    ]) notes, which receive the benefit of a derivative agreement, may not be redeemed earlier than the expected maturity date of the Class [    ]([    ]-[    ]) notes [unless [specify any exceptions]].]

[Cleanup Call]

[The Depositor or an affiliate thereof, may purchase the remaining notes of any tranche (including the Class [    ]([    ]-[    ]) notes), class or series if the nominal liquidation amount of such tranche, class or series is less than 5% of the highest outstanding dollar principal amount of such tranche, class or series at any time. See “The Notes — Cleanup Calls.” If the Class [    ]([    ]-[    ]) notes are redeemed at a time when prevailing interest rates are relatively low, you may not be able to reinvest the redemption proceeds in a comparable security with an effective interest rate equivalent to that of the Class [    ]([    ]-[    ]) notes.]

Other Tranches of Notes May Have Different Terms That May Affect The Timing And Amount of Payments to You

The note issuance trust has issued other tranches of notes and expects to issue additional tranches of notes from time to time. Other tranches of notes may have terms that are different than the terms for your tranche, including different early amortization events or events of defaults. In addition, the early amortization events and events of default for other tranches of notes may be subject to grace periods or rights to cure that are different than the grace periods or rights to cure applicable to the same or similar early amortization events or events of default for your tranche. As a result, other tranches of notes may enter into early amortization periods prior to the payment of principal on your tranche of notes. This could reduce the amount of principal collections available to your tranche at the time principal collections begin to be accumulated or paid for the benefit of your tranche and could cause a possible delay or reduction in payments on your notes. Additional tranches of notes may be issued without any requirement for notice to, or consent from, existing noteholders. For a description of the conditions that must be met before the note issuance trust can issues new notes, see “The Notes — Issuances of New Series, Classes and Tranches of Notes” in this prospectus.

The issuance of new notes could adversely affect the timing and amount of payments on outstanding notes. For example, if additional notes in the same group as your tranche for purposes of sharing excess finance charge collections are issued after your notes and those notes have a higher interest rate than your notes, this could result in a reduction in the amount of series finance charge amounts available to pay interest on and absorb charge-offs allocated to your notes. Also, when new notes are issued, the voting rights of your notes will be diluted.

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There May Not Be a Public Market For the Notes And an Active Trading Market For the Notes May Not Develop

[We do not currently intend to apply for listing of the notes on any securities exchange or to include the notes in any automated quotation system.] We have been advised by the underwriters that they presently intend to make a market in the Class [    ]([    ]-[    ]) notes. However, they are under no obligation to do so and may discontinue any market-making activities at any time without any notice. Accordingly, no liquid market for the notes may develop, and any market that develops may not last. If the notes are traded, they may trade at a discount from their offering price, depending on prevailing interest rates, the market for similar securities, our performance and other factors. To the extent that an active trading market does not develop, you may not be able to resell your notes at their fair market value or at all.

[Certain Events Affecting or Involving Other Parties to the Transactions]

[Funds to make payments on the Class [    ]([    ]-[    ]) notes are supplied by [derivative counterparty][supplemental enhancement provider][supplemental liquidity provider]. If such party were to enter conservatorship, receivership or bankruptcy or were to become insolvent, payments to you could be accelerated, delayed or reduced.]

Interchange May Decrease Substantially Due to an Insolvency Event or a Reduction in the Rate of Interchange Fees

The amount of interchange allocated to the collateral certificate, which is included in finance charge amounts allocated to the DiscoverSeries, relates to transaction volume and therefore will likely decline substantially, and potentially to zero, in the event of an insolvency or receivership of Discover Bank or an additional originator. In addition, although the right to interchange will have been assigned prior to such an event, interchange is only deposited monthly on each distribution date and the master trust may not have a perfected security interest in, or the FDIC may challenge the master trust’s right to, interchange that has not been deposited prior to such an event. Accordingly, we cannot assure you that amounts with respect to interchange will be available to the master trust following an insolvency or receivership, and a legal opinion with respect to interchange would not be meaningful. In addition, the rate at which interchange fees are paid is determined by contract and may be renegotiated from time to time. Any such renegotiation may reduce the amount of interchange paid to the master trust.

Litigation and Regulatory Matters

In the normal course of business, from time to time, Discover Bank and/or one or more its affiliates have been named as a defendant in various legal actions, including arbitrations, class actions, and other litigation, arising in connection with our activities. Certain of the actual or threatened legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. Discover Bank contests liability and/or the amount of damages as appropriate in each pending matter.

Discover Bank has historically relied on the arbitration clause in its cardmember agreements, which has in some instances limited the costs of, and our exposure to, litigation, but there can be no assurance that Discover Bank will continue to be successful in enforcing the arbitration clause in the future. Legal challenges to the enforceability of these clauses have led most card issuers and may cause Discover Bank to discontinue their use. In addition, bills have been pending and are periodically introduced in Congress to directly or indirectly prohibit the use of pre-dispute arbitration clauses, and the Dodd-Frank Act authorized the CFPB to conduct a study on pre-dispute arbitration clauses and, based on the study, potentially limit or ban pre-dispute arbitration clauses. A preliminary report on arbitration agreements issued by the CFPB expressed concerns about these clauses that may signal the agency is contemplating action to limit or ban such clauses. Further, Discover Bank and/or one or more of its affiliates are involved in pending legal actions challenging the arbitration clause.

Discover Bank and its affiliates are also involved, from time to time, in other reviews, investigations and proceedings (both formal and informal) by governmental regulatory and enforcement agencies regarding our business, including, among other matters, accounting, tax and operational matters, some of which may result in adverse judgments, settlements, fines, penalties, injunctions, decreases in regulatory ratings or other relief, which could materially impact Discover Bank’s financial results, increase its cost of operations, require a change in business activities and product offerings or limit its ability to execute its business strategies and engage in certain business activities. [As noted under “—Deteriorations in Master Trust Performance or Receivables Balance; Possible Early Redemption Event — Legislative and Regulatory Initiatives”, the CFPB is currently investigating certain student loan practices of Discover Bank.] Litigation and regulatory actions could also adversely affect Discover Bank’s reputation.

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[On June 13, 2014, Discover Bank entered into a Consent Order with the FDIC to resolve previously disclosed matters related to the FDIC’s examination of Discover Bank’s anti-money laundering and related compliance programs. In the Consent Order, Discover Bank agreed to, among other things, enhance its anti-money laundering and related compliance programs. The order does not include civil money penalties but does cause Discover Bank to incur significant expenses. The Federal Reserve recently notified Discover Financial Services of its intention to enter into a supervisory action to require enhancements to the Company’s enterprise-wide anti-money laundering and related compliance programs.]

[Litigation and Regulatory Matters — U.S. Bank]

[U.S. Bank has provided the following information to Discover Funding LLC for inclusion in this prospectus:

“In June 2014 a civil complaint was filed in the Supreme Court of the State of New York, New York County, by a group of institutional investors against U.S. Bank, in its capacity as trustee or successor trustee (as the case may be) under certain residential mortgage backed securities (“RMBS”) trusts. The plaintiffs are investment funds formed by nine investment advisors (AEGON, BlackRock, Brookfield, DZ Bank, Kore, PIMCO, Prudential, Sealink and TIAA) that purport to be bringing suit derivatively on behalf of 841 RMBS trusts that issued $771 billion in original principal amount of securities between 2004 and 2008. According to the plaintiffs, cumulative losses for these RMBS trusts equal $92.4 billion as of the date of the complaint. The complaint is one of six similar complaints filed against RMBS trustees (Deutsche Bank, Citibank, HSBC, Bank of New York Mellon and Wells Fargo) by certain of these plaintiffs. The complaint against U.S. Bank alleges the trustee caused losses to investors as a result of alleged failures by the sponsors, mortgage loan sellers and servicers for these RMBS trusts and asserts causes of action based upon the trustee’s purported failure to enforce repurchase obligations of mortgage loan sellers for alleged breaches of representations and warranties concerning loan quality. The complaint also asserts that the trustee failed to notify securityholders of purported events of default allegedly caused by breaches of mortgage loan servicers and that the trustee purportedly failed to abide by appropriate standards of care following events of default. Relief sought includes money damages in an unspecified amount and equitable relief. In November 2014, the plaintiffs sought leave to voluntarily dismiss their original state court complaint and filed a substantially similar complaint in the United States District Court for the Southern District of New York. The federal civil complaint added a class action allegation and a change in the total number of named trusts to 843 RMBS trusts. In December 2014, the plaintiffs’ motion to voluntarily dismiss their original state court complaint was granted. Other cases alleging similar causes of action have previously been filed against U.S. Bank and other trustees by RMBS investors in other transactions.

There can be no assurances as to the outcome of the litigation, or the possible impact of the litigation on the trustee or the RMBS trusts. However, U.S. Bank denies liability and believes that it has performed its obligations under the RMBS trusts in good faith, that its actions were not the cause of losses to investors and that it has meritorious defenses, and it intends to contest the plaintiffs’ claims vigorously.”]

Economic and Financial Market Conditions May Adversely Affect Your Notes

Beginning in 2007, adverse economic conditions in the United States and in the global capital markets have caused a contraction of available credit and have generally reduced the market price and liquidity for DiscoverSeries notes and other securities that represent interests in securitization vehicles. See “—Limited Ability to Resell Notes.” These conditions have also adversely impacted credit card usage, payment patterns and the rate of defaults by Discover Bank customers.

Although the economy has continued to improve generally with respect to employment and housing market conditions, the improvement has not been at a rapid pace. A customer’s ability and willingness to repay Discover Bank can be negatively impacted by economic conditions and other payment obligations, resulting in increased delinquencies and charge-offs. Related social factors such as consumer confidence levels, attitudes towards incurring debt, the public’s perception of the use of credit cards and the stigma of personal bankruptcy may also adversely affect credit card usage. Economic conditions also can reduce the usage of credit cards in general and the average purchase amount of transactions industry-wide, including Discover cards, which reduces interest income and transaction fees used to make payments on the notes. These conditions and factors could reduce excess spread and, if sufficiently severe, could

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cause an early redemption event for DiscoverSeries notes, which would affect the timing and amount of payments on the Class [    ]([    ]-[    ]) notes. We cannot predict future economic conditions, the impact such conditions may have on credit card usage, repayment patterns or delinquency and charge-off rates or, consequently, the impact such conditions may have on the timing and amount of payments on the Class [    ]([    ]-[    ]) notes. See “Deteriorations in Master Trust Performance or Receivables Balance; Possible Early Redemption Event — (3) Payments, Generation of Receivables and Maturity.”

Deteriorating or adverse economic conditions may also adversely affect the value, liquidity and credit ratings of permitted investments of funds deposited to the master trust or note issuance trust accounts. Although permitted investments are required to have the highest rating of the applicable rating agencies at the time of purchase or to otherwise meet rating agency standards intended to minimize risk of loss on such investments, risk of loss cannot be entirely eliminated. As holder of the transferor certificate in the master trust, Discover Funding LLC receives the investment income, and bears the risk of loss, on permitted investments of funds in the master trust’s collections account, although any such loss may subject investors to the credit risk of Discover Funding LLC. Investors in the Class [    ]([    ]-[    ]) notes bear the risk of loss related to permitted investments in the related principal funding subaccount.

Holding Company Regulation

Discover Bank is considered to be a “bank” for purposes of the Bank Holding Company Act of 1956, as amended (“BHCA”), a federal statute that requires companies controlling banks to register as bank holding companies with the Board of Governors of the Federal Reserve System (the “Federal Reserve”). In 2009, Discover Financial Services became a bank holding company under the BHCA and a financial holding company under the Gramm-Leach-Bliley Act. Registration as a bank holding company subjects Discover Financial Services to new legal and regulatory requirements, including minimum capital requirements, and subjects Discover Financial Services to oversight, regulation and examination by the Federal Reserve. For instance, as a bank holding company, Discover Financial Services is subject to organization-wide oversight and examination by the Federal Reserve and its business activities are restricted to those permitted by the BHCA. Additionally, the Dodd-Frank Act requires the Federal Reserve to impose additional prudential standards on systemically significant institutions, including Discover, regarding risk-based capital requirements, leverage limits, liquidity requirements, risk management and concentration limits. Beginning in December 2011, the Federal Reserve has issued proposed rules including a wide range of measures addressing issues such as capital, liquidity, credit exposure, stress testing, risk management and early remediation requirements. Additional rules addressing prudential standards will also likely be adopted in the future. If Discover Financial Services fails to satisfy the regulations and requirements set forth in the BHCA, including those arising in connection with the Dodd-Frank Act, its financial condition and results of operations could be adversely affected.

The Dodd-Frank Act’s provisions related to increased capital and liquidity requirements would establish minimum leverage and risk-based capital requirements on a consolidated basis for all depository institution holding companies and insured depository institutions that cannot be less than the strictest requirements in effect for depository institutions as of the date of enactment of the Dodd-Frank Act (i.e., July 21, 2010). In addition, in December 2010 the Basel Committee on Banking Supervision released the Basel III rules text. Basel III will increase requirements as to both the quantity and quality of regulatory capital and will also establish new liquidity coverage and net stable funding ratios. In July 2013, the Federal Reserve, FDIC and OCC issued a final rule to implement the provisions of the Basel III regulatory capital reforms that is applicable to Discover Financial Services and Discover Bank. Discover is still evaluating these rules. We are not able to predict at this time the effect of these capital and liquidity guidelines or regulations that have been or may be adopted by regulatory agencies having authority over Discover Financial Services, Discover Bank and their subsidiaries or the impact that any changes in regulation would have on these entities. However, we expect that the new standards will generally require Discover Financial Services and/or Discover Bank to maintain more capital and/or manage the configuration of assets and liabilities in order to comply with formulaic liquidity requirements, which could significantly impact return on equity, financial condition, operations, capital position and ability to pursue business opportunities. In September 2014, the Federal Reserve, the FDIC and OCC also issued a final rule to implement the Basel III liquidity coverage ratio requirements. Discover Financial Services and Discover Bank are still assessing the impact of these rules.

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FDIC Rule Regarding Securitizations

As discussed in “—Insolvency Related Matters,” some of the powers of the FDIC upon certain events of insolvency or receivership are limited as a result of the Safe Harbors adopted by the FDIC. To the extent the provisions of the New Safe Harbor on which we are relying apply, the FDIC has agreed that it will not use its repudiation power to recover, reclaim or recharacterize as assets of a failed insured depository institution any assets that were transferred to a master trust in a securitization meeting the requirements of the rule. The applicability of these provisions of the New Safe Harbor to the master trust and note issuance trust requires, among other things, that the transfer of the receivables would have received sale accounting treatment under generally accepted accounting principles in effect prior to November 15, 2009. Although other FDIC rules and policy statements, including the Statement of Policy Regarding the Treatment of Security Interests After Appointment of the FDIC as Conservator or Receiver, which was adopted by the FDIC in 1993, provide additional protections to investors, if the provisions of the New Safe Harbor on which we are relying were to not apply and we continue to not satisfy the alternative provisions of the New Safe Harbor on which we are not currently relying, any exercise of remedies would automatically be stayed for 45 or 90 days, and the FDIC may seek to recover, reclaim or recharacterize as assets of Discover Bank receivables that have been transferred to the depositor and to terminate Discover Bank’s obligations to service the receivables or transfer new receivables to the depositor upon certain events of insolvency or receivership. This could result in delayed or reduced payments to you or losses on the Class [    ]([    ]-[    ]) notes. See “—Insolvency Related Matters.” This may also prevent future issuances of notes from the note issuance trust.

Issuance of Additional Series of Master Trust Certificates

The master trust may issue additional series of master trust certificates or increase any existing series without your consent. Discover Funding LLC and the master trust will not request your consent to issue new series or to increase Series 2007-CC or any other existing series. The trustee for the master trust will authenticate and deliver a new series of master trust certificates or additional certificates in any existing series only if, among other conditions, Standard & Poor’s and Moody’s have confirmed that they will not reduce or withdraw the rating of any class of any series of certificates outstanding at the time of the new issuance because of the new issuance. If the master trust does issue one or more additional series or additional certificates in any existing series, those series or certificates may impact the timing and amount of allocations to the collateral certificate and, in turn, payments you receive on the Class [    ]([    ]-[    ]) notes from the note issuance trust.

[If the note issuance trust has pledged an additional collateral certificate under the indenture at the time an amortization event occurs for the Series 2007-CC collateral certificate or another event occurs that requires Discover Funding LLC to repurchase all or a substantial portion of the receivables in the master trust or the Series 2007-CC collateral certificate, the note issuance trust may be able to reinvest the proceeds of such amortization or repurchase in such additional collateral certificate, rather than repaying the Class [    ]([    ]-[    ]) notes. Similarly, if any such event were to occur with respect to an additional collateral certificate, the note issuance trust may be able to reinvest the proceeds it receives in the Series 2007-CC collateral certificate or a different additional collateral certificate. If such proceeds are reinvested, such event will not be an early redemption event for the Class [    ]([    ]-[    ]) notes, the Class [    ]([    ]-[    ]) notes will not be repaid as a result of such event even if you determine that repayment would be desirable, and the collateral supporting the Class [    ]([    ]-[     ]) notes will thereafter reflect such reinvestment.]

Issuance of Additional Notes

The note issuance trust may issue additional series, classes or tranches of notes or increase existing series, classes or tranches of notes, including the Class [    ]([    ]-[    ]) notes, without your consent. [For Class B and Class C: If additional notes are issued in the DiscoverSeries that are senior to the Class [    ]([    ]-[    ]) notes, they will increase the extent to which your notes are subordinated and the degree to which your notes are exposed to risk of loss.] The note issuance trust will not request your consent to issue new series, classes or tranches of notes or to increase existing series, classes or tranches of notes[For Class B and Class C:, even where such issuances or increases will have the effect of increasing the extent to which the Class [    ]([    ]-[    ]) notes are subordinated.] The indenture trustee will authenticate and deliver a new series, class or tranche of notes or additional notes in an existing series, class or tranche only if, among other conditions, there is sufficient credit enhancement on that date, either in the form of outstanding subordinated notes or other forms of credit enhancement, and the note issuance trust delivers to the indenture trustee and the applicable note rating agencies a certificate to the effect that the note issuance trust

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reasonably believes that the new issuance will not cause an early redemption event or event of default for any outstanding DiscoverSeries notes, including the Class [    ]([    ]-[    ]) notes[For Class B and Class C:; provided that the note issuance trust does not have to consider any effects on the timing of principal payments on outstanding subordinated notes caused by the issuance of senior notes]. If the note issuance trust does issue one or more additional series, classes or tranches of notes, those series, classes or tranches may impact the timing and amount of payments you receive on the Class [    ]([    ]-[    ]) notes, and may dilute voting rights based on the Class [    ]([    ]-[    ]) notes with respect to matters subject to voting by the holders of the master trust certificates and the DiscoverSeries notes.

Amendment of Indenture and Pooling and Servicing Agreement

Under the indenture and the indenture supplement for the DiscoverSeries, some actions require the consent of noteholders holding a specified percentage of the aggregate outstanding dollar principal amount of notes of one or more affected series, classes or tranches or all the notes. Consenting to amendments relating to the collateral certificates securing the Class [    ]([    ]-[    ]) notes requires the consent of 66 2/3% of the aggregate outstanding dollar principal amount of notes of the affected series, classes or tranches of notes. In the case of votes by series or votes by holders of all of the notes, the outstanding dollar principal amount of the senior-most class of notes will generally be substantially greater than the outstanding dollar principal amount of the subordinated classes of notes. Consequently, the noteholders of the senior-most class of notes will generally have the ability to determine whether and what actions should be taken. The subordinated noteholders will generally need the concurrence of the senior-most noteholders to cause actions to be taken.

The Series 2007-CC collateral certificate and each subsequently transferred collateral certificate will be an investor certificate under the applicable pooling and servicing agreement, and the Class [    ]([    ]-[    ]) noteholders will have indirect consent rights under such pooling and servicing agreement. See “The Indenture — Voting.” Generally, under a pooling and servicing agreement, some actions require the vote of a specified percentage of the aggregate principal amount of all of the investor certificates. Such percentage will be calculated without taking into account the outstanding dollar principal amount represented by any notes beneficially owned by Discover Funding LLC or any of its affiliates or agents. These actions include consenting to amendments to the applicable pooling and servicing agreement. In the case of votes by holders of all of the investor certificates, the holders of other series of investor certificates, if any, may have the ability to determine whether and what actions should be taken. The noteholders, in exercising their voting powers under the related collateral certificate, may need the concurrence of the holders of the other investor certificates, if any, to cause action to be taken.

Historical Information

The historical performance of the master trust accounts, as presented under “The Master Trust — The Master Trust Accounts — Summary Historical Performance of the Accounts” may not be representative of the future performance of the portfolio or the master trust accounts in all material respects. Interchange yield may decline, potentially to zero, if the amount of new transactions involving master trust accounts declines.

The remainder of this prospectus uses some capitalized terms. We have defined these terms in “Glossary of Terms.”

The Discover Card Business

General

Prior to the formation of Discover Funding LLC, Discover Bank had conveyed receivables directly to the master trust pursuant to the Pooling and Servicing Agreement. Following the formation of Discover Funding LLC, Discover Bank has conveyed, and will continue to convey, receivables to Discover Funding LLC pursuant to the Receivables Sale and Contribution Agreement and Discover Funding LLC, as successor seller to Discover Bank under the Pooling and Servicing Agreement, has conveyed, and will convey, those receivables to the master trust pursuant to the Pooling and Servicing Agreement. These receivables were generated from transactions made by holders of the Discover card, a general purpose credit and financial services card. In addition, Discover Bank has

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conveyed to Discover Funding LLC, which in turn has transferred to the master trust, the right to receive the allocable portion of the interchange fees paid by or through merchant acceptance networks (which includes the network of its affiliate, DFS Services LLC) to Discover Bank in connection with transactions on accounts of the type included in the master trust, which we refer to as “interchange.” The portion ultimately conveyed to the master trust is determined by dividing the net merchant sales processed on the accounts for any month by the net merchant sales processed on all accounts in the Discover card portfolio of the type included in the master trust for that month, and is deposited to the master trust only on the related distribution date. The receivables conveyed to the master trust before the date of this prospectus include only receivables arising under accounts in the Discover card portfolio, although at a later date Discover Bank may transfer other receivables to Discover Funding LLC (which will in turn transfer such receivables to the master trust) that do not arise under accounts in the Discover card portfolio. Designations of additional accounts will also include the allocable portion of interchange fees arising after the date of designation. See “The Master Trust — Master Trust Addition of Accounts.” In this prospectus, we present information about the pool of receivables that Discover Funding LLC has conveyed to the master trust and the accounts in which they arise. When we refer to the Discover card in this section entitled “The Discover Card Business,” we are referring to the Discover it card, and other general purpose cards and card products issued by Discover Bank.

Discover Bank began distributing the Discover card nationally in March 1986. Since that time, Discover Bank has introduced a number of new cards and products that have additional or different features and benefits. The Discover card gives customers access to a revolving line of credit. Customers can use their Discover cards to purchase merchandise and services from participating merchants, to transfer balances and to obtain cash advances at automated teller machines and at certain other locations. Customers can also obtain cash advances by writing checks against their accounts.

Customers are generally subject to account terms and conditions that are uniform from state to state. See “—Billing and Payments.” In all cases, the customer agreement governing the terms and conditions of the account permits Discover Bank to change the credit terms, subject to the limitations of the CARD Act described above, including the rate of the periodic finance charge, the fees imposed on accounts and other terms and conditions, upon prior notice to customers where notice is required by law. Discover Bank assigns each Discover card account a credit limit when it opens the account. Generally, after the account is opened, Discover Bank may increase or decrease the credit limit on the account, at Discover Bank’s discretion, at any time. The credit limits on Discover card accounts generally range from $500 to $25,000.

Discover Bank offers numerous card products that allow customers to earn rewards based on how they want to use credit. One feature is the Cashback Bonus^® reward, where customers receive rewards based upon their level and type of purchases. Discover Bank currently offers the following card products under which the receivables in the master trust may arise:

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Customers may redeem Cashback Bonus rewards at any amount, any time. Discover Bank will credit a customer’s account with their Cashback Bonus balance if their account is closed or if they have not used it within 18 months. They can use their Cashback Bonus to pay select online partners, redeem for a statement credit, make certain charitable donations or direct deposit at any amount. When customers choose to redeem their Cashback Bonus for partner gift cards, they have the opportunity to increase their reward from one of approximately 170 merchant partners. Cashback Bonus rewards are not paid from the property of the master trust or the note issuance trust.

Discover Bank applies both variable and fixed rates of finance charges to account balances arising from purchases of merchandise and services, as well as those arising from cash advances and balance transfers, in Discover card accounts. Although we have moved the majority of our credit card loans to variable rates, some of our loans are still at fixed rates. The variable rates are based on the prevailing prime rate plus a margin. See “—Billing and Payments.” Discover Bank also offers customers money market accounts, savings accounts, checking accounts and certificate of deposit accounts. These deposit products offer competitive rates of interest and are insured by the FDIC up to the maximum amount. To differentiate the Discover card in the marketplace, and to increase accounts, balances and customer loyalty, Discover Bank from time to time tests and implements new offers, promotions and features of the Discover card.

Discover Bank is the sole servicer under the master trust’s Pooling and Servicing Agreement and is ultimately responsible for the overall servicing function. Discover Bank outsources certain servicing functions to Discover Products Inc. (“DPI”), its wholly owned subsidiary. DPI provides these servicing activities and functions to Discover Bank on its own or with the assistance of third-party vendors that contract directly with DPI. For example, DPI has contracted with BancTec, Inc. (“BancTec”), a third-party service provider, for certain check processing and related services. Working together in this manner, Discover Bank and DPI generally perform all of the functions required to service and operate the Discover card accounts. These functions include, but are not limited to, soliciting new accounts, processing applications, issuing new accounts, authorizing and processing transactions, billing customers, processing payments (also with BancTec), providing customer service and collecting delinquent accounts. Discover Bank and DPI together maintain multiple operations centers across the country for servicing customers. DPI also maintains a recovery group to process accounts that Discover Bank has charged off as uncollectible.

Customers may access their accounts online with the Discover Card Account Center website or mobile application, which offer a menu of e-mail and mobile notifications or reminders to regularly inform customers about the status of their accounts. Types of notifications include reminders that a customer’s credit limit is being approached or that a minimum payment is due. In addition, customers may view detailed account information online, such as recent transactions and account payments. Customers also have access to tools such as Spend Analyzer which enables them to compare spending in different categories, such as gas or supermarkets, and Paydown Planner which helps them create a plan to reduce their balance. Customers may pay their Discover card bills online at no cost and receive exclusive discounts and special Cashback Bonus rewards by shopping online at the website.

DFS Services LLC maintains the Discover^® Network, which has established arrangements (either directly or indirectly through merchant acquirers) with merchants to accept payment cards issued on the Discover^® Network, including the Discover card, for cash advances and as the means of payment for merchandise and services. Discover Bank contracts with DFS Services LLC to have cards issued by Discover Bank, including the Discover card, accepted at those merchants. DFS Services LLC receives merchant discount/acquirer interchange for providing

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services to merchants and acquirers and pays interchange fees to Discover Bank. Discover Bank’s ability to generate new receivables and interchange requires locations where customers can use their Discover cards. DFS Services LLC works with merchant acquirers and a sales and service force to maintain and increase the size of its merchant base. DFS Services LLC also maintains additional operations centers that are devoted primarily to providing customer service to merchants. The merchants that accept the Discover card encompass a wide variety of businesses, including local and national retail establishments and specialty stores of all types, quick service food establishments, governments, restaurants, medical providers and warehouse clubs, and many leading airlines, car rental companies, hotels, petroleum companies and mail order companies, as well as Internet merchandise and service providers.

Discover has capitalized on the October 2004 U.S. Supreme Court decision, rejecting an appeal by Visa and MasterCard in U.S. v. Visa/MasterCard, which allows financial institutions to issue credit and debit cards on the Discover^® Network, which is owned by DFS Services LLC, an affiliate of Discover Bank. DFS Services LLC has entered into agreements with various third-party issuers to launch new bank cards and other products on the Discover^® Network. The Discover^® Network has been active in other areas as well. For example, DFS Services LLC has signed agreements with a number of companies to act as merchant acquirers for the Discover^® Network and provide processing services to such merchants. The Discover business also includes PULSE Network LLC (“PULSE”), an ATM/debit and electronic funds transfer network, and Diners Club International Ltd. (“Diners”), a global payments network. PULSE offers financial institutions a full-service debit platform and product set, including signature debit, PIN debit, gift card, stored value card and ATM services, and Diners offers transaction processing and marketing services to licensees globally. PULSE and Diners are subsidiaries of DFS Services LLC. DFS Services LLC acquired PULSE in January 2005 and Diners in June 2008. The combination of the Discover^® Network, PULSE and Diners results in an electronic payments company offering a range of products and services for financial institutions, consumers and merchants.

The following sections describe Discover Bank’s credit granting procedures, portfolio management policies, collection and charge-off policies, billing and payment policies and other specific aspects of the Discover business as they relate to its unsecured credit card business. Discover Bank may change these policies and practices over time in accordance with Discover Bank’s business judgment and applicable law.

Credit-Granting Procedures

New Customers (Account Acquisition)

Discover Bank acquires new customers for the Discover card portfolio either through targeted marketing efforts or through unsolicited individual applications. In either case, Discover Bank has a rigorous process for screening applicants. In terms of identifying potential customers, Discover Bank uses proprietary targeting and analytical models to identify credit-worthy prospects and matches them with appropriate product offerings. Discover Bank gives consideration to the prospective customer’s financial stability, as well as ability and willingness to pay. Discover Bank employs multiple acquisition channels, including direct mail, internet and print advertising. Online channels account for the greatest proportion of new consumer accounts.

Discover Bank assesses the creditworthiness of each applicant through its underwriting process by evaluating prospective customers’ applications using credit information provided by the credit bureaus and other sources. Discover Bank uses credit scoring systems, both externally developed and proprietary, to evaluate customer and credit bureau data. The credit bureaus may provide Discover Bank with a FICO^® score for an individual to help assess credit risk. A FICO^® score is a number which represents a credit assessment for an individual, using a proprietary credit scoring method owned by Fair Isaac Corporation. For more information, see “The Master Trust — The Master Trust Accounts — Distribution of the Accounts by FICO^® Score.” Discover Bank uses experienced credit underwriters to supplement its automated decision-making processes. Approximately 20% of all credit card applications are subject to manual review that covers the areas of key customer data verification, fraud prevention and approval of credit lines. Upon approval of a customer’s application for an unsecured credit card, Discover Bank assigns a credit line based on risk level, income, outstanding obligations and expected card usage, and assigns specific annual percentage rates and terms for different customers and products.

Management of consumer credit risk, including in connection with the acquisition of new accounts, is the primary responsibility of the Acquisition Strategy Committee (“ASC”), a subcommittee of the Discover Bank Credit

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Committee. The responsibilities of the ASC include (i) establishing credit criteria and strategies for managing credit losses related to the acquisition of new credit card customers; (ii) approving credit strategy changes that impact the risk, revenue and/or profit dynamics of accounts; (iii) monitor actual performance of approved credit card acquisition policy and strategies and (iv) ensuring that modifications to the credit policy guidelines are fully documented and reported to the Discover Bank Credit Committee.

Existing Customers (Portfolio Management)

Proactive management of Discover card customers’ accounts is a critical part of Discover Bank’s credit risk management, and all accounts are subject to ongoing credit assessment. This assessment reflects information relating to the performance of the customer’s Discover card account as well as information from credit bureaus and other sources relating to the customer’s broader credit performance. Discover Bank utilizes scoring models (statistical evaluation models) to support the measurement and management of credit risk. At the individual customer level, Discover Bank uses custom risk models together with generic industry models as an integral part of the credit decision-making process. Depending on the duration of the customer’s account, risk profile and other performance metrics, the account may be subject to a range of account management treatments, including eligibility for marketing initiatives, limits on transaction authorization, and increases or decreases in purchase and cash credit limits. As explained above, the CARD Act restricts Discover Bank’s ability to change interest rates based on credit risk. For further discussion of Discover Bank’s ability to change the terms of the accounts, see “Deteriorations in Master Trust Performance or Receivables Balance; Possible Early Redemption Event — (1) Discover Bank May Change Terms of the Accounts.”

As the owner of the Discover card accounts, Discover Bank has the right to change its credit-scoring criteria and creditworthiness criteria. Discover Bank regularly reviews and modifies its credit-scoring system to reflect Discover Bank’s actual credit experience with Discover card account applicants and customers as that historical information becomes available. Discover Bank believes that refinements of these procedures and system since the inception of the Discover card program have helped its analysis and management of credit losses. However, Discover Bank cannot assure you that these actions will prevent increases in credit losses in the future. For further discussion related to customers’ ability to make payments on the accounts, see “Deteriorations in Master Trust Performance or Receivables Balance; Possible Early Redemption Event — (1) Payments, Generation of Receivables and Maturity.” Relaxation of credit standards typically results in increases in charged-off amounts, which, under certain circumstances, could potentially lead to a decrease in the levels of the receivables in the Discover card portfolio and the receivables in the master trust. If there is a decrease in the level of receivables in the master trust, and if Discover Bank does not add additional accounts, or interests in other pools of credit card receivables, to Discover Funding LLC for subsequent transfer to the master trust, an early redemption event could result, causing the note issuance trust to begin to repay the principal of your notes sooner than expected. An increase in the amount of receivables charged off as uncollectible, without an offsetting increase in Finance Charge Collections and other income, could also cause an early redemption event and cause the note issuance trust to begin to repay the principal of your notes sooner than expected.

Management of consumer credit risk, including in connection with Discover Bank’s existing portfolio of credit card customers, is the primary responsibility of the Portfolio Strategy Committee (“PSC”), a subcommittee of the Discover Bank Credit Committee. The responsibilities of the PSC include: (i) establishing credit criteria and strategies for managing credit losses related to the ongoing management of credit card customers; (ii) approving credit strategy changes that impact the risk, revenue and/or profit dynamics of accounts; (iii) monitor actual performance of approved credit card portfolio management policy and strategies and (iv) ensuring that modifications to the credit policy guidelines are fully documented and reported to the Discover Bank Credit Committee.

Collection Efforts and Charged-Off Accounts

Efforts to collect past-due Discover card accounts receivable are made by collections personnel of DPI. Under current practice, a request for payment of past-due amounts is included in the monthly billing statements of all accounts with these amounts. Collection personnel generally initiate contact with customers within 30 days after any portion of their balance becomes past due. The nature and timing of the initial contact, typically a personal call or letter, are determined by a review of the customer’s prior account activity and payment habits. For higher risk accounts, as determined by statistically derived predictive models, telephone contacts may begin much sooner

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compared to lower risk customers. If initial contacts fail to elicit a payment, Discover Bank continues to attempt to contact the customer by telephone and by mail. Discover Bank also may enter into arrangements with customers to waive finance charges, fees and principal due, or extend or otherwise change payment schedules, including re-aging accounts in accordance with regulatory guidance. An account is re-aged when it is returned to current status without collecting the total amount of principal, interest and fees that are contractually due. The practice of re-aging an account may affect delinquencies and charge-offs, potentially delaying or reducing such delinquencies and charge-offs. A re-age is intended to assist delinquent customers experiencing a temporary hardship who have demonstrated both the ability and willingness to resume making regular payments and who satisfy other criteria. Generally, to qualify for a re-age, an account must have at least nine months of activity and may not have been re-aged more than once within any twelve-month period or twice within any five-year period. Additionally, a customer must also have made three consecutive minimum monthly payments or the equivalent cumulative amount. A re-age that involves a workout is generally limited to one re-age and is defined as a former open-end credit card account upon which credit availability has been closed and the amount owed has been placed on a fixed repayment schedule in accordance with modified terms and conditions. Discover Bank believes its re-age practices are consistent with regulatory guidance.

Discover Bank’s current policy is to recognize losses and to charge off an account by the end of the sixth full calendar month after a payment amount is first due, if payment of any portion of that amount has not been received by that time. In certain cases, such as bankruptcies, probate accounts and fraudulent transactions, an uncollectible balance may be charged off earlier. For example, bankruptcies and probate accounts are charged off at the end of the month 60 days following the receipt of notification of the bankruptcy or death, but not later than the end of the sixth full calendar month after a payment amount is first due. In general, after Discover Bank has charged off an account, collections personnel of DPI attempt to collect all or a portion of the charged-off account. If those attempts do not succeed, DPI generally places the charged-off account with one or more collection agencies or, alternatively, Discover Bank may commence legal action against the customer, including legal action to attach the customer’s property or bank accounts or to garnish the customer’s wages. Discover Bank may also sell charged-off accounts and the related receivables to third parties, either before or after collection efforts have been attempted. In addition, at times charged-off accounts may, subject to Moody’s and Standard & Poor’s consent, be removed by Discover Funding LLC from the master trust and transferred back to Discover Bank. Discover Bank will transfer proceeds from any of these removed accounts and the related receivables to Discover Funding LLC which will, in turn, transfer such proceeds to the master trust. Fraudulent transactions are generally written off 90 days following notification, but not later than the end of the sixth full calendar month after a payment amount is first due. Amounts related to fraudulent transaction write-offs are absorbed by Discover Funding LLC as Transferor and Discover Bank, as originator and are not allocated to the master trust or its investors, including the Class [    ]([    ]-[    ]) noteholders and other noteholders of DCENT.

Under the terms of the Pooling and Servicing Agreement, the master trust’s assets include any recoveries received on charged-off accounts, including the proceeds that Discover Bank has transferred to Discover Funding LLC, which has transferred such proceeds to the master trust, from any charged-off receivables that Discover Funding LLC has removed from the master trust. These recoveries are treated as Finance Charge Collections. Neither Discover Bank nor Discover Funding LLC can assure you that the level of recoveries on charged-off accounts for the master trust will consistently approximate levels for the Discover card portfolio as a whole. Any addition of accounts to the master trust will temporarily reduce both the levels of charged-off accounts and recoveries, each as a percentage of the receivables in the master trust, because no added accounts will be charged-off accounts at the time they are added to the master trust.

The Accounts

Discover Bank selected the accounts in a random manner intended to produce a representative sample of all Discover card accounts not then segregated from the Discover card portfolio. See “—Effects of the Selection Process.” The accounts were randomly selected on numerous different dates since the formation of the master trust in October 1993 from the pool of unsecuritized accounts then available in the Discover card portfolio. The master trust is entitled to all receivables arising on the accounts since the date they were added to the master trust. Collections of the receivables in the accounts are allocated to the collateral certificate beginning on the first day of the calendar month in which the collateral certificate is issued, which is the series cut-off date. The series cut-off date is used solely to determine allocations and is not the date on which assets are treated as belonging to the master trust or the collateral certificate is treated as belonging to the note issuance trust. Because credit card receivables by

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their nature are revolving assets, by which we mean that new receivables are continually generated and repaid in the accounts, even when the revolving period for the collateral certificate ends, new receivables generated in the accounts continue to be treated as master trust assets and continue to indirectly support the notes. Discover Funding LLC also may randomly select accounts for removal from the list of accounts designated to the master trust or may remove accounts from designation subject to other limiting criteria. The accounts currently designated to the trust reflect prior removals. For additional information on the composition of the accounts, see “The Master Trust — The Master Trust Account — Current Composition and Distribution of the Master Trust Accounts.”

Billing and Payments

Discover card accounts generally have the same billing structure. Discover Bank sends a monthly billing statement to each customer who has an outstanding debit or credit balance. Customers can also waive their right to receive a physical copy of their bill, in which case they will receive their statement online at the Discover Card Account Center. Discover card accounts are grouped into multiple billing cycles for operational purposes. Each billing cycle has a separate billing date, on which Discover Bank processes and bills to customers all activity that occurred in the related accounts during the period of approximately 28 to 32 days that ends on that date. The accounts include accounts in all billing cycles.

Each customer with an outstanding debit balance in his or her Discover card account must generally make a minimum payment in an amount based on the customer’s outstanding balance, any past due amount and any finance charges and late fees assessed. Under certain circumstances, Discover Bank will exclude late fees from customers’ minimum monthly payment; however, those fees may be carried forward in such customers’ outstanding debit balances until they are paid. If a customer exceeds his or her credit limit as of the last day of the billing period, Discover Bank may include all or a portion of this amount in the customer’s minimum monthly payment.

From time to time, Discover Bank has offered and may continue to offer customers with accounts in good standing the opportunity to skip the minimum monthly payment, while continuing to accrue periodic finance charges and applicable fees, without being considered past due. A customer may pay the total outstanding balance at any time. Discover Bank also may enter into arrangements with delinquent customers to extend or otherwise change payment schedules, and to waive finance charges, fees and/or principal due, including re-aging accounts in accordance with regulatory guidance. See “—Collection Efforts and Charged-Off Accounts.” Although Discover Bank does not expect these practices to have a material adverse effect on investors, collections may be reduced during any period in which Discover Bank offers customers the opportunity to skip the minimum monthly payment or to extend or change payment schedules.

Discover Bank applies various rates of finance charges to account balances, as described under “The Discover Card Business — General.” Periodic finance charges on purchases, balance transfers and cash advances are calculated on a daily basis, subject to a grace period for purchases that essentially provides that periodic finance charges are not imposed on new purchases or any portion of a new purchase paid by the payment due date if the customer paid their entire balance on their prior billing statement in full by the due date on that statement. Neither cash advances nor balance transfers are subject to a grace period. In connection with balance transfers and for other promotional purposes, certain account balances may accrue periodic finance charges at lower fixed rates for varying periods of time.

In addition to periodic finance charges, Discover Bank may impose other charges and fees on Discover card accounts. Unless otherwise specified in a cash advance offer, Discover Bank charges a cash advance fee that is calculated as a fixed amount or a percentage of the transaction. In the event that the fee is calculated as a percentage of the cash advance, there will typically be a minimum fee and no maximum. Discover Bank generally charges a late fee each time a customer has not made a minimum payment by the required due date. For the Discover it, Discover it Chrome and Discover it Miles cards, there is no late fee for the first late payment. The late fee is triggered by the failure to make the minimum payment when due. Discover Bank charges a fee for any payment (such as a check) returned unpaid and a fee for Discover card cash advance, balance transfer or other promotional checks that are returned by Discover Bank. The fees that Discover Bank charges for late, returned payment and returned checks comply with the requirements of the CARD Act. Specifically, Discover Bank will charge a $25 fee for the first such violation and a $35 fee for subsequent violations of the same type that occur in the next 6 billing periods. In no event will the late fee or returned payment fee exceed the minimum payment due, and the returned check fee will not

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exceed the amount of the related check. Unless otherwise specified in a balance transfer offer, Discover Bank charges a balance transfer fee that is calculated as a percentage of the balance transfer. There will typically be a minimum fee and there may be a maximum fee, as described in any balance transfer offer.

See “Risk Factors — Deteriorations in Master Trust Performance or Receivables Balance; Possible Early Redemption Event — Consumer Protection Laws and Regulations,” “—Payments, Generation of Receivables and Maturity” and “—Discover Bank May Change Terms of the Accounts.”

Discover Bank will review a customer’s account on the last day of each billing period to determine the rate that will apply to the account. Currently, for all products except Discover it, Discover it Chrome and Discover it Miles, if a customer fails to make a required payment when due, the standard rate for purchases may increase for new transactions to a variable penalty rate determined by adding up to 5 additional percentage points to the otherwise applicable annual percentage rate. In addition, any special rate on balance transfers and purchases may terminate for new transactions, and the penalty rate may apply. The penalty rate will be based on a customer’s credit worthiness and other factors such as current annual percentage rates and account history. Any increased rate will apply for new transactions made more than 14 days after provision of 45 days’ advance notice of the effective date of the increase. There is no penalty rate for Discover it, Discover it Chrome and Discover it Miles.

If a customer’s rate was increased under any penalty rate plan, such as those discussed above, we will, to the extent required by the CARD Act and its implementing regulations, periodically review the account to determine if the rate should be reduced.

The yield on the accounts in the master trust — which consists of the finance charges, fees and other income — depends on various factors, including changes in interest rates over time, customer account usage and payment performance, none of which can be predicted, as well as the extent to which balance transfer offers and special promotion offers are made and accepted, and the extent to which Discover Bank changes the terms of its customer agreement or the terms of any product, service or benefit associated with customer accounts. Yield from interchange depends on the rate at which new purchases are made on the accounts and the applicable rates of interchange fees paid to Discover Bank, which may vary over time. Reductions in the yield could, if large enough, cause an early redemption event to occur or result in insufficient collections to pay interest and principal on your notes. Discover Bank cannot assure you about any of these effects. See “Risk Factors — Deteriorations in Master Trust Performance or Receivables Balance; Possible Early Redemption Event,” “—Effects of an Early Redemption Event or Event of Default; Excess Spread Early Redemption Cure” and “—Investor Risk of Loss.”

Effects of the Selection Process

Discover Bank selected the accounts from accounts serviced at all Discover Bank and DPI operations centers and from accounts of residents of the 50 states, the District of Columbia and certain United States’ territories and possessions. Pursuant to the requirements of the Pooling and Servicing Agreement, the additional designation of new accounts to the master trust by Discover Funding LLC must not cause any materially adverse effect on the current certificateholders of any class of any outstanding series of certificates (including DCENT as holder of the collateral certificate). Also pursuant to the requirements of the Pooling and Servicing Agreement, the selection procedures utilized in the removal of accounts must not cause any materially adverse effect on the current certificateholders of any class of any outstanding series of certificates (including DCENT as holder of the collateral certificate). Discover Bank cannot assure you that the use and payment performance of customers on the master trust accounts will be representative of Discover customers as a whole in all material respects.

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Servicing

Master Servicer, Servicer and Calculation Agent

Master Servicer. Discover Bank acts as master servicer for the master trust. In addition to the master servicer, there also may be one or more servicers of the accounts. The master servicer will coordinate the activities of the various servicers for the master trust. The duties of the master servicer include:

Servicer. Discover Bank is currently the only servicer under the Pooling and Servicing Agreement with respect to the accounts. Discover Bank has been servicing credit card accounts since 1985. Discover Bank has acted as master servicer for the master trust and servicer of the accounts since 1993. There has never been a Master Servicer Termination Event or a Servicer Termination Event for the master trust. Discover Bank has a longstanding practice of outsourcing a portion of its servicing functions to certain of its affiliates. The affiliate currently providing servicing functions, DPI, has acted as servicer since 2007. Typically, when servicing functions have been transferred between or among Discover Bank and its affiliates, any necessary personnel and facilities have also been transferred to the new legal entity. Thus, the servicing experience of DPI encompasses the servicing experience of its predecessor affiliated servicers. DPI provides these servicing activities and functions to Discover Bank on its own or with the assistance of third-party vendors that contract directly with DPI. For example, DPI has contracted with BancTec, a third-party service provider, for certain check processing and related services. BancTec has been providing such services with respect to the accounts since 2008. Discover Bank remains responsible for the overall servicing function. Additional servicers may be added to the master trust at a later date if receivables in accounts other than credit accounts originated by Discover Bank are added to the master trust. If Discover Funding LLC transfers an additional collateral certificate to the note issuance trust, one or more additional servicers may perform servicing functions with respect to the receivables supporting such additional collateral certificate. If any affiliated or unaffiliated servicer or servicing participant were to be subject to a bankruptcy proceeding or become insolvent, the servicing of the accounts and related payments could be delayed and payment to the master trust’s certificateholders (including DCENT as holder of the collateral certificate), or the certificateholders of any additional master trust or other securitization special purpose vehicle issuing an additional collateral certificate, could be affected. Any such delay or other effect could also affect payment to the Class [    ]([    ]-[    ]) noteholders.

Each servicer will perform servicing functions with respect to the accounts for which it is the servicer. The servicing functions for each servicer with respect to its accounts include:

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The master servicer and servicer have no custodial responsibilities with respect to the accounts designated for the master trust. See “The Master Trust — Sale and Assignment of Receivables to the Master Trust.”

The master servicer has no duty to pay an amount in lieu of collections from its own funds if any servicer fails to transfer collections to the master servicer or to the master trust at the direction of the master servicer.

[Describe any material changes (if any) to the servicer’s policies or procedures in the servicing function it will perform in the current transaction for assets of the same type included in the current transaction during the past three years.]

Upon appointment of any additional servicer, Discover Bank as master servicer and servicer and such additional servicer will enter into a master servicing agreement, which will govern the relationship among the master servicer and the servicers.

Discover Bank has acted as the master servicer and primary servicer of the master trust since its formation. For information regarding the size, composition and growth of Discover Bank’s portfolio of serviced assets, see “The Master Trust — The Master Trust Accounts — Current Composition and Distribution of the Master Trust Accounts.”

Outsourcing Arrangements. Under the Pooling and Servicing Agreement, the master servicer and servicer may delegate any of its duties thereunder to any person provided that such person agrees to act in accordance with the policies relating to the applicable accounts. For example, DPI has contracted with BancTec, a third-party service provider, on certain check processing and related services. Such delegation will not relieve the master servicer or servicer of its liabilities and responsibilities with respect to such duties. With respect to the accounts serviced by Discover Bank and pursuant to the servicing agreements between DPI and Discover Bank, the following functions are among those performed in cooperation or separately by each of DPI (or third-party vendors operating through DPI) for Discover Bank:

In addition to the above referenced services which are provided by DPI, DPI will perform remittance processing and monthly statement preparation. As described above, DPI has contracted with BancTec to perform certain of such functions. Discover Bank is solely responsible for payment to DPI of the fees for servicing under the

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