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Capital One will commit $265 billion over five years to lending, philanthropy and investing if its acquisition of Discover Financial Services goes through, the bank said Wednesday, aiming to appease critics and win over regulators.
Under the plan reached with four community groups, Capital One pledged to maintain $200 billion in lending to low- and moderate-income (LMI) consumers and communities over five years for the combined entity. It will retain Discover’s only branch in Delaware and will not close any branches as a result of the transaction. Capital One will also retain 30% of its branches and cafes in LMI communities and pledged not to lay off front-line employees.
McLean, Va.-based Capital One also pledged more than $35 billion to support affordable housing for low- and moderate-income communities and individuals, 30% more than the bank’s previous program, in addition to other small business loans, products and education commitments.
Announced in FebruaryCapital One’s $35 billion acquisition of Discover will create the largest credit card issuer (by balance) and sixth-largest bank (by assets) in the U.S. The deal will also give Capital One control of Discover’s credit card payment network, making Discover the fourth-largest payment network operator after Visa, Mastercard and American Express.
Some influential community groups oppose a merger between the two largest U.S. consumer credit card lenders, fearing it would reduce services and increase costs for Americans. Supporters say it could Promoting competition in payments.
Capital One’s community benefit program, which has never been previously reported, is more than twice the size of any such program to date. Data from, The National Community Reinvestment Coalition (NCRC) is a nonprofit network.
That could help quell critics and make the deal more palatable to the Federal Reserve and the Office of the Comptroller of the Currency (OCC). Under political pressure Crack down on mergers and acquisitions. Regulators are Public Meetings Friday to discuss the deal.
“I think the OCC and the Fed care very much about this program and how we’re going to have a positive impact on the community. They see this as something like competition, financial stability and other factors that they look at,” Andres Navarrete, head of external affairs at Capital One, told Reuters in an interview.
The plan also includes $600 million for community development financial institutions, six times the amount previously planned by the two banks, and will increase planned charitable giving by 29 percent to $575 million.
Community groups have increasingly pressed acquiring banks to commit to community benefit programs, arguing that consolidation since the 2007-2009 financial crisis has reduced Americans’ access to affordable financial services.
Chip MacDonald, an M&A lawyer and managing director of MacDonald Partners, said that while the Fed and the Office of the Comptroller of the Currency don’t require such plans, they are required by law to carefully review the amenities and needs of affected communities, and that the agencies also consider commitments to maintain or expand services.
However, skeptics say the programs often lack transparency, have no legal force and are difficult to measure.
“You don’t know what the bank originally planned to do, so it’s unclear what the additional commitments are,” said Jeremy Kress, a professor at the University of Michigan.
Capital One said it will report progress annually to the Federal Reserve and the Office of the Comptroller of the Currency and provide regular updates to the Community Advisory Committee.
U.S. Bancorp’s $100 billion community benefits plan, which will be unveiled in 2022 to complete its acquisition of MUFG Bank, is the largest ever, according to the NCRC, which negotiates all state benefit plans.
The group has been a vocal critic of Capital One, saying the bank has not lived up to $28.5 billion in mortgage and home loan commitments it made in 2012 when it acquired ING Direct USA.
Capital One Bank exited the business in 2017. NCRC believes that home loans are an important part of welfare programs because they help build wealth.
“We invested a lot of money over the years to build a mortgage business that ultimately failed to pan out,” Navarrete said. The bank said that outweighed all its other commitments.
Navarrete said credit cards and auto loans, which made up Wednesday’s $200 billion LMI loan figure, are also key products that help consumers meet basic needs and build credit histories.
In an unusual move, Capital One bypassed the NCRC and reached Wednesday’s plan with four community groups, including the National Association of Latino Community Asset Builders (NALCAB), which together represent about 800 nonprofits.
NALCAB CEO Marla Bilonick said she thought the plan was generous and that Capital One’s public commitment “is important because it gives accountability.”
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