Capital One has committed to providing $265 billion in lending, investment, and philanthropy over the next five years, contingent upon the approval of its acquisition of Discover Financial Services.
The announcement comes amid the $35.3 billion merger agreement between the two financial services giants, announced in February. If the deal is approved, it would establish the largest credit card company in the U.S. by loan volume and the sixth-largest bank by assets. Capital One would also gain control of and access to Discover’s payment network, which includes 70 million merchant acceptance points globally.
Such a significant acquisition is expected to face stringent regulatory scrutiny in the U.S., with concerns regarding its impact on competition within the banking, credit card, and payments sectors. However, Capital One hopes that the considerable community-oriented financial commitment will persuade regulators to view the Discover deal more favorably.
“We have a long history of developing innovative ways to serve these core constituencies, and we are committed to ensuring, through this community benefits plan, that our acquisition of Discover builds on our history of positive impact,” stated Capital One chief Richard Fairbank.
The Federal Reserve and Office of the Comptroller of the Currency, the regulatory bodies reviewing the deal, will be holding a public meeting to discuss the proposed acquisition on Friday.
Capital One’s $265 billion pledge is more than twice as large as any previous community commitment associated with a bank acquisition. This figure includes $200 billion in consumer lending to low- and moderate-income consumers and communities, $44 billion in community development financing, $15 billion in small business lending, $5 billion in spending with diverse suppliers, $600 million in support for community development financial institutions, and $575 million in philanthropy.
Despite this substantial commitment, some community groups have raised concerns. National Community Reinvestment Coalition CEO Jesse Van Tol criticized the plan, describing its creation as a “deeply flawed process” and arguing that the impressive figures in Capital One’s announcement might distract from issues of implementation and accountability.
In contrast, Horacio Mendez, President and CEO of Woodstock Institute, one of the community groups consulted in the plan, praised the initiative as a step forward for the industry. “While nobody got everything they asked for, everyone involved in this process recognizes that substantive change and progress have been made on important issues,” Mendez said. He highlighted Capital One’s commitment to fair and responsible lending and collaboration on advocacy issues as creating a powerful new alliance for systemic solutions.