WASHINGTON, D.C.— Shayna Olesiuk, Director of Banking Policy, issued the following statement in connection with the filing of Better Markets’ Comment Letter on the proposal by Capital One Financial Corporation (“Capital One”) to acquire Discover Financial Services and Discover Bank (“Discover”) and for Discover to merge with Capital One.
“The proposed merger of Capital One and Discover will harm Main Street Americans, small businesses, the economy, the financial system, and financial stability. It will reduce competition, provide less choice, enable higher fees and costs, and cause job losses. Approval of the merger would hurt consumers and small businesses, erode competition, endanger financial stability, and allow two banks with an egregious history of inadequate management, excessive risk-taking, and repeated illegal behavior to grow even larger and more interconnected. Under the law, Congress intended the banking agencies to deny mergers that “in any respects” fail to meet public interest objectives concerning convenience and needs, managerial resources and future prospects, and financial stability. There is no question that this proposed merger fails all three considerations and amply justifies, if not mandates, regulators to deny it.
“This merger would combine the 10th largest bank with the 26th largest bank to create the 6th largest bank and would create the largest credit card issuer in the U.S. Research shows that larger credit card issuers consistently charge higher interest rates to consumers regardless of how good their credit ratings are and Capital One is already among the highest-priced credit card issuers in the country with interest rates on credit card products above 30%. The increased market concentration from this merger will almost certainly lead to higher credit card interest rates and higher fees charged to consumers. In fact, credit card companies in 2022 alone moved more than $105 billion in interest and more than $25 billion in fees from the pockets of consumers into the pockets of those companies.
“‘We don’t exist to serve banks; banks exist to serve us,’ the head of the OCC said recently. Now is the time for the banking regulators to put up or shut up and deny this merger. Rejecting this anti-competitive merger by a bank that also has a shocking recidivist RAP sheet of lawless behavior is justified and merited.
“The evidence also shows that the merger will particularly disadvantage the subprime credit card market, which contains a disproportionate share of low-income and minority borrowers. Capital One has the largest amount of subprime credit card loans and this merger will further shrink the number of competitors in the market, which will hit subprime borrowers hardest. For example, if Capital One raises interest rates or fees after the proposed combination, subprime borrowers will have even more limited options to switch to other lenders because of their low credit scores and they may incur additional fees or further hits to their credit score if they attempt to change lenders.
“Adding insult to injury, both Capital One and Discover have a long history of illegal, willful, deceptive, and unfair actions that have repeatedly consumed regulatory attention and often resulted in fines for both banks. This includes Capital One willfully failing to implement an effective anti-money laundering program, for which it paid $390 million in civil penalties in 2021.”
The Comment Letter can be found here.
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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.
