The proposed merger between Capital One and Discover quickly drew pushback from some Democratic lawmakers and consumer advocacy groups, who argued that the partnership could reduce competition and increase rates and costs for consumers. .
Senate Banking Committee Chairman Sherrod Brown (D-Ohio) said, “When it comes to mergers of this size, regulators need to do their part to ensure that consumers continue to have access to safe and affordable financial products and services. “We need to ensure that our financial system remains strong and competitive.”
“Rubber-stamp mergers that make powerful financial companies even bigger and more powerful do no good for families,” he added.
Capital One announced Monday that it will acquire Discover Financial Services in a $35.3 billion all-stock deal. The transaction could be completed as early as the end of 2024, subject to regulatory and shareholder approvals of both companies.
“Our acquisition of Discover is a once-in-a-lifetime opportunity to bring together two highly successful companies with complementary capabilities and franchises to create a payments network that can compete with the largest payment networks and payment companies,” said Founder. said Richard Fairbank, Chairman and CEO. of Capital One.
Fairbank added that the merger will help “transform the payments and banking market.”
But Sen. Elizabeth Warren (D-Mass.), a member of the Senate Banking Committee, urged regulators to block the merger plan.
“The merger of [Capital One] and [Discover] It would threaten our financial stability, reduce competition, and increase fees and credit costs for American families,” Warren said. I wrote to Xthe platform formerly known as Twitter.
Both Brown and Warren are seeking re-election this term. Warren is almost certain to win re-election, but Brown faces one of the toughest races as Republicans fight to retake the Senate in 2024, according to nonpartisan election handicappers. cook political report.
“This Wall Street deal is dangerous and will harm working people. Regulators must stop it immediately,” Warren added.
Warren is not alone in asking federal regulators to block the merger.
“The partnership between Capital One and Discover will accelerate the consolidation of the credit card sector while creating another giant bank that is too big to fail,” said a nonprofit group that supports stricter antitrust policies. said Shahid Naeem, senior policy analyst at the American Economic Liberties Project. .
“Giving the green light to create the nation’s sixth largest bank and largest credit card issuer is indefensible, especially given the negative effects of bank and credit card consolidation that have already prompted enforcement authorities and Congress to become more stringent with both.” This is because we are planning a new approach.”
Sheila Baer, former chair of the Federal Deposit Insurance Corporation, said it was “ironic” that the credit card giant was using “equity rather than debt” to finance its transactions.
“CapOne’s proposed acquisition of Discover is driven by the profitability of the card industry, which is driven by consumers overcharging, carrying balances, and paying hundreds of billions in interest and fees,” Baer said. Ta. I wrote to X.
Liz Zelnick, director of the economic security and corporate power program at the left-leaning group Accountable US, called on federal regulators to take a “hard look” at the deal.
“This merger will further reduce competition, meaning there will be less incentive to check the greedy ways these companies funnel billions of dollars to consumers,” Zelnick said.
The Capital One and Discover merger brings together two of the largest players in the credit card market. Consumer Financial Protection Bureau (CFPB) published research A study last week found that smaller issuers are offering lower interest rates than the 25 largest credit card companies in the first half of 2023.
by CFPB Report, small banks’ low interest rates can save consumers an average of $400 to $500 a year. These savings are important as U.S. credit card debt is at an all-time high, topping $1.1 trillion in the fourth quarter of 2023, according to . new york federal reserve.
The Consumer Bankers Association (CBA), an industry group representing large U.S. banks, slammed the report as “misleading” and said that while the report focuses on annual percentage rates, the analysis provides It was pointed out that the range of products and services offered by the government was not taken into account. Different interest rates, fees, perks and benefit packages.
“Rather than strengthen this already competitive and highly regulated market, the CFPB is steering consumers into a one-size-fits-all world, focusing on specific criteria chosen by the CFPB rather than consumer preferences.” “Everyone should work to serve,” said Lindsey Johnson, CBA President and CEO.
The proposed agreement comes at a time of tense consolidation in Washington state, particularly in the credit card industry.
Bipartisan support is growing for legislation that would mandate more choice in the credit card payment network market, currently dominated by Visa and Mastercard. The bill’s sponsor, Senate Judiciary Chairman Dick Durbin (D-Ill.), has scheduled a hearing on competition in the credit card market for April.
A spokesperson for Durbin declined to comment on the merger.
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