66°
The Federal Reserve's board approved the deal on Friday, April 18. The merger brings together two of the country's top credit card issuers, giving Capital One control of Discover's global payments network of 70 million merchant locations in more than 200 countries.
The acquisition – first announced in February 2024 – is expected to close Sunday, May 18, the companies said in a joint news release.
"This is an exciting moment for Capital One and Discover," said Capital One CEO and founder Richard Fairbank. "We understand the critical importance of a strong and competitive banking system to our customers and our economy, and we appreciate the thoughtful and diligent engagement of our regulators as they thoroughly reviewed this deal over the past 14 months."
Once combined, Capital One plans to expand its reach in digital banking, payments, and consumer lending to better compete with credit card giants like Visa and Mastercard.
"The combination of our two great companies will increase competition in payment networks, offer a wider range of products to our customers, increase our resources devoted to innovation and security, and bring meaningful community benefits," Discover president Michael Shepherd said.
Along with the merger, regulators took serious enforcement actions against Discover.
In a separate announcement on April 18, the Federal Deposit Insurance Corporation revealed two orders against Discover Bank. They include a $150 million fine and a requirement to repay more than $1.2 billion to merchants affected by misclassified credit card transactions.
According to the FDIC, Discover misclassified millions of personal credit cards as commercial over 17 years. The error resulted in merchants being overcharged more than $1 billion in interchange fees on the Discover network.
The FDIC ordered Discover to issue restitution payments and implement a corrective action plan. At the same time, the Federal Reserve Board fined Discover’s parent company another $100 million in a separate consent order.
Discover has already agreed to pay $1.2 billion to settle class-action claims tied to the misclassification, financial news website Banking Dive reported. That settlement was disclosed in July 2024 and has been paid out from existing reserves.
The Office of the Comptroller of the Currency also gave conditional approval to the Capital One-Discover merger.
"The OCC's approval of Capital One's application is conditioned upon the approved plans detailing effective and sustainable corrective actions and timelines to address the root causes of any outstanding enforcement actions against Discover Bank and remediation of harm," the agency said in a news release.
Capital One, based in McLean, Virginia, will have about $660 billion in assets once the merger is complete, the OCC said.
"The OCC is committed to a regulatory framework that expands access to financial services for consumers, businesses and communities," said Rodney Hood, Acting Comptroller of the Currency.
Capital One said it will roll out a five-year, $265 billion community benefits plan after the deal closes. The plan includes lending, investments, and services aimed at improving financial well-being and expanding economic opportunity across the US.
Discover and Capital One customers will continue to use their accounts as usual. Capital One said the merger will not affect customer accounts in the short term and future changes will be announced in advance.
Discover shareholders will receive 1.0192 Capital One shares for each Discover share. That's a 26.6% premium based on Discover's stock price in February 2024.
Click here to follow Daily Voice Bethesda and receive free news updates.
