NEW YORK — Regulatory approval has been granted for the anticipated merger of Capital One and Discover Financial Services, bringing the $35 billion agreement closer to realization. This development follows the consent of key financial authorities.
The Federal Reserve and the Office of the Comptroller of the Currency have ratified the merger, which was initially announced in February 2024. During this announcement, the Federal Reserve Board imposed a consent order on Discover, alongside a $100 million penalty, in light of certain interchange fee overcharges that occurred between 2007 and 2023. Discover has addressed these practices and has committed to reimbursing customers who were overcharged. This action has been coordinated with the Federal Deposit Insurance Corporation.
Moreover, Capital One has agreed to adhere to the Board’s actions concerning Discover, located in Riverwoods, Illinois, which includes meeting specific rectification requirements as part of the merger approval conditions.
The OCC highlighted that its approval is based on a detailed evaluation of the potential merger’s impacts on local communities, the broader banking sector, and the U.S. financial system as a whole.
Capital One, headquartered in McLean, Virginia, has stated it is on track to finalize the acquisition by May 18, having obtained all the necessary regulatory clearances. Shareholders from both firms had endorsed the deal earlier in February.
The merger signifies a significant consolidation within the credit card market, integrating two major entities outside traditional banking giants like JPMorgan Chase and Citigroup, save for American Express. This union is particularly noteworthy as both companies cater to a similar customer base that favors cash back options and modest travel rewards over the premium offerings from AmEx, Citi, and Chase.
Furthermore, the merger will offer Discover’s payment network a strategic alliance with a dominant credit card entity, potentially revitalizing its competitive stance in the market. The landscape of the U.S. credit card industry is primarily governed by the Visa-Mastercard partnership, with American Express and Discover trailing behind. This merger is poised to reshape dynamics in the sector.