Regulators say Capital One and Discover can merge.
Two of the country’s largest credit card companies are poised to merge after key banking regulators approved the deal on Friday, despite concern among some advocacy groups and lawmakers that it could lead to higher fees and less choice for consumers.
Capital One received the green light from the Federal Reserve Board and the Office of the Comptroller of the Currency to acquire Discover Financial Services in a roughly $35 billion deal announced in February 2024. Capital One, with $479billion in assets, is the ninth-largest US bank. It issues credit cards through networks operated by Visa and Mastercard. Acquiring Discover will give it access to a credit card network of 305 million cardholders, adding to its base of more than 100 million customers.
The banks, which said they expected the deal to close on May 18, have argued that the merger would create a stronger competitor to the giants in the network space: Visa and Mastercard. The deal would “increase the competition in payment networks, provide a wider range products to our customers and increase our resources dedicated to innovation and security,” Michael Shepherd said in a Friday statement. The group, which promotes the access to banking, has been against the deal since its announcement. The Office of the Comptroller of the Currency, in a statement on Friday, said 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.”
Capital One cleared another significant obstacle to its acquisition of Discover after the Justice Department, which also has authority to block banking deals, told regulators this month that it didn’t see sufficient competition concerns to block the merger. Banking analysts said the move indicated that Trump administration regulators might be more open than the Biden administration to bank mergers.
During the Biden administration, the Justice Department told regulators that it was concerned, in part, about the deal’s impact on potential credit card users who had no credit. The department tightened oversight of banking transactions in the last months of the Biden administration. It updated its framework for evaluating banking deals to include more stringent guidelines.
