The Federal Reserve’s Board of Governors and the Office of the Comptroller of the Currency approved Capital One’s (COF) acquisition and merger with Discover Financial Services (DFS), the authorities said Friday.
A plan “to address the underlying root causes of any outstanding enforcement actions against Discover Bank and plans for remediation of harm” must be submitted by Capital One to the OCC as a requirement of the approval.
Capital One would have a significant advantage over rival credit card issuers like JPMorgan Chase (JPM), Bank of America (BAC), and Citigroup (C) that do not handle transaction processing thanks to the all-stock agreement, which was initially disclosed more than a year ago.
Capital One has traditionally served consumers with subprime credit scores, particularly those in the 600s, in contrast to other major credit card issuers. These borrowers typically pay higher interest rates than those with better scores since they are viewed as riskier.
The Fed said it signed a consent agreement with Discover and assessed a $100 million penalty “for overcharging certain interchange fees from 2007 through 2023” when it approved the merger.However, the Trump administration has generally been perceived as being far more amenable to mergers. Shares of Capital One, Discover, and other businesses that were trying to merge or had previously cancelled arrangements all increased in value immediately following President Donald Trump’s election in November of last year.
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