Capital One approved to acquire Discover for $35 billion.
On April 18th, the Federal Reserve Board and the Office of the Comptroller of the Currency approved Capital One Financial Corporation’s $35 billion acquisition of Discover Financial Services. The approval is conditional on the resolution of pending enforcement actions against Discover.
The Federal Reserve also entered into a consent order with Discover and assessed a fine of $100 million for overcharging certain interchange fees from 2007 through 2023. These practices were terminated and Discover is repaying affected customers. The Federal Reserve’s action is being taken in coordination with the Federal Deposit Insurance Corporation (FDIC), which concurrently ordered Discover to pay a $150 million civil fine for these practices.
The combined entity will have over $650 billion in assets, it will be the largest US credit card issuer by balances, and it will control Discover’s card payment network.
While some believe the merger will increase competition among the payment networks that will benefit consumers, others believe it will reduce competition and lead to higher costs for consumers. On May 2nd, Congresswoman Maxine Waters (D-CA) and Senator Elisabeth Warren (D-MA) issued a letter to the Federal Reserve requesting that it stay and reconsider its approval of the merger. The letter asserts that the merger will inflict serious harm on consumers and merchants, especially low-income consumers and small businesses, and threaten the stability of the US financial system. The lawmakers also assert that recent developments, including the impact of tariffs, the Department of Government Efficiency (DOGE)’s work with the FDIC, and efforts to shut down the Consumer Financial Protection Bureau should have been taken into account.
There has been no indication that the Federal Reserve plans to reconsider its approval of the merger.
Now that Capital One and Discover have received all the necessary regulatory approvals, the transaction is expected to close on May 18th.
For more information see this Wall Street Journal article.
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