new york
CNN
–
There could soon be a new biggest credit card company in the US.
Capital One (COF) has been approved by the duties of the Federal Reserve and the Secretary of Money, and has received loans to merge with Discover Financial Services (DFS), the agency announced Friday.
To obtain full approval, the OCC must provide Capital One with a plan to provide a “plan to address the underlying underlying causes of outstanding enforcement actions against Discover Bank and to correct harm.”
The all-stock transaction, first announced more than a year ago, gives one capital to banks that issue competing credit cards, such as JPMorgan Chase (JPM), Bank of America (BAC), and Citigroup (C).
It also gives Capital One a new source of revenue from the sales fees it collects.
For existing discovery customers, this move could increase merchant acceptance rates. However, there is also the risk that they could face higher credit card rates.
Compared to other major credit card issuers, Capital One has historically served customers with credit scores in the 600s range, considered subprime. These borrowers are considered to be risky and are more likely to charge higher interest rates compared to high-scoring individuals.
When signing the transaction, the Fed issued a discovery and consent form, announcing it had discovered a $100 million penalty “to overcharge certain interchange fees from 2007 to 2023.”
This is a developing story and will be updated.
