WASHINGTON–Two of the biggest credit card issuers in the country have gotten regulatory approval to combine—even as one of them was given a $100 million fine at the same time.
Over the objections of some consumer groups and lawmakers who have suggested the combination will lead to higher fees and less choice for consumers, the Federal Reserve and the Office of the Comptroller of the Currency have given the thumbs up to a Capital One’s acquisition of Discover.
The approximately $25 billion deal, which was announced in February of this year, will give Capital One access to Discover’s card network of 305 million cardholders, adding to its base of more than 100 million customers.
The $479-billion Capital One is the nation’s largest bank. It issues credit cards on networks run by both Visa and Mastercard. With the regulatory approval the two institutions said they expect the deal to be finalized on May 18.
‘Stronger Competitor’
In seeking approval for the deal, Capital One and Discover have argued the merger would create a stronger competitor to the giants in the network space: Visa and Mastercard.
The deal will “increase competition in payment networks, offer a wider range of products to our customers, increase our resources devoted to innovation and security, and bring meaningful community benefits,” Michael Shepherd, interim chief executive at Discover, said in a statement.
Not So Fast…
But not everyone shares that assessment.
“The feds got this one wrong — so it falls to state attorneys general to intervene against the harmful, anticompetitive Capital One-Discover merger,” Jesse Van Tol, CEO of the National Community Reinvestment Coalition, said in a statement.
In announcing its approval, the Fed also said it had fined Discover $100 million for overcharging certain interchange fees — transaction fees that a merchant’s bank pays to the credit card-issuing bank — from 2007 to 2023.
Meanwhile, the Office of the Comptroller of the Currency, said in a statement last week , that its approval of the deal was conditional on the banks’ addressing “the root causes of any outstanding enforcement actions against Discover Bank and remediation of harm.”
