Federal regulators must scrutinize proposed Capital One-Discover merger, says Ohio senator

If a proposed merger between Capital One Financial Corp. and Discover Financial Services is approved, it would create a bank having massive influence in the markets for credit cards, debit cards, and payments network services, says U.S. Sen. Sherrod Brown (D-OH).

“I urge your agencies to review this transaction to ensure that it benefits consumers, workers, small businesses, communities, and the broader economy,” wrote Brown, chairman of the U.S. Senate Banking, Housing, and Urban Affairs Committee, in a July 24 letter sent to federal regulators.

The proposed merger, Brown wrote, would create the sixth-largest bank in the country, with nearly $630 billion in assets. Capital One, in its February proposal, said it would acquire Discover’s payments networks, through which Discover facilitates credit and debit payments between 70 million merchants and more than 300 million cardholders, making the combined firm the largest credit card issuer in the United States.

The congressman pointed out that while Capital One says that the newly acquired payments networks and expanded credit card market share would deliver competition against network giants Visa and Mastercard and create newfound benefits for cardholders and merchants, regulators must ensure how Capital One would fulfill such promises and how widespread and meaningful these benefits would be by providing specific data and details.

“Your agencies, in turn, must conduct the necessary due diligence to confirm these statements are accurate and ensure that Capital One intends to and is able to meet these promises,” the lawmaker wrote Federal Reserve Vice Chair for Supervision Michael Barr and Acting Comptroller Michael Hsu in his letter.

He urged them to investigate how the merging banks plan to lower costs for consumers and save jobs, and he highlighted the importance of considering recent public input in ensuring that the review process is responsive to impacted communities.

“The proposed merger between Capital One and Discover could create a new financial conglomerate while potentially limiting consumer choice for credit products and delivering unclear outcomes for small businesses,” wrote Brown. “Regulators and the public must understand those implications before any potential approval.”

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