Congressional Democrats urged regulators to closely scrutinize Capital One Financial’s proposed acquisition of the credit card company Discover Financial Services, describing the acquirer’s history of regulatory missteps.
In a Nov. 20 letter to the Federal Reserve's board of governors and the Office of the Comptroller of the Currency, Sen. Elizabeth Warren of Massachusetts and Rep. Alexandria Ocasio-Cortez of New York, among others, cite CapOne’s broken promises and repeated regulatory action against the bank. “Capital One has a troubling history with acquisitions,” the letter said.
The letter notes the McLean, Virginia-based company would gain 300 hundred million of new customers if the Discover deal is approved.
The bank and card issuer announced plans to acquire Riverwoods, Illinois-based Discover in February. Capital One acknowledged in October that the $35-billion deal would be finalized some time next year, though earlier it had expected it might close this year. Discover is also a bank, card issuer and a credit card network.
The Democrats are hardly the only critics of the proposed deal. Consumer advocates, for example, say the merger would give the combined company too big a share of the non-prime credit card market, potentially pushing up fees for low-income cardholders.
Capital One pushed back on such criticism, insisting it will continue to provide “reasonably priced credit” to customers.
The first example cited in the letter was Capital One's promised $180 billion community investment commitment, which it pledged as a sweetener for winning approval of its 2011 merger with Dutch company ING Direct. That included $28.5 billion in mortgage lending for low-to-moderate income borrowers.
That commitment to help borrowers ultimately shrank to $11.3 billion, the Democrats wrote, citing an article from the news outlet Bloomberg.
And in 2012, the Consumer Financial Protection Bureau ordered Capital One to return $140 million to 2 million customers after finding that Capital One's vendors pressured consumers to buy add-on products, the letter said.
The OCC fined Capital One $100 million in 2018 after finding that the bank was not fully complying with anti-money laundering laws, the Democrats wrote. The bank's compliance program was weak and it failed to file suspicious activity reports, the regulator said at the time.
The bank has also been accused of pursuing debt collections too aggressively, the letter said, noting that the Los Angeles County District Attorney fined Capital One $2 million for harassing consumers with debt collection calls in 2022.
“As you consider Capital One’s application to acquire Discover and its 300 million card holders, we ask that you thoroughly review the facts of these abuses,” the letter concludes.
A spokesperson for Capital One did not respond to a request for comment.
Despite Democratic opposition, the merger is likely to be approved by regulators, said Brian Graham, a partner at financial services advisory and investment firm Klaros Group, whose specialties include acquisitions.
Capital One and Discover are both big banks, but the merger would create a card network that could compete with Visa and Mastercard, he said. Some lawmakers and regulators have been eager to inject more competition into that market.
The reelection of Donald Trump “reduces the risk that it doesn't get approved, but I think that was headed for approval anyway,” Graham said.
