New York Attorney General Letitia James is launching an investigation into Capital One’s proposed $35.3 billion acquisition of Discover Financial Services, raising concerns that the merger may violate the state’s antitrust laws.
In recent court filings, James requested a subpoena for documents from Capital One, citing the bank’s alleged lack of cooperation in the investigation. She emphasized that this merger could significantly impact New York, as Capital One and Discover have more than $9.5 billion and $6.5 billion in credit card loans in the state, respectively.
James highlighted that the effects of such a merger would likely be “particularly felt by the often vulnerable New Yorkers with subprime credit scores,” pointing to the potential risks for consumers who may be adversely affected.
Capital One, based in McLean, Virginia, is one of the largest banks in the U.S., boasting $480 billion in assets as of June 30. The bank is set to report its third-quarter results soon. Discover, headquartered in Riverwoods, Illinois, recently announced a third-quarter profit of $965 million.
In response to the investigation, Capital One stated it would address the Attorney General’s concerns through the appropriate legal channels, expressing confidence in securing merger approval from federal banking regulators. “We have made a strong case on the pro-competitive and pro-consumer benefits of this transaction,” the company noted.
The all-stock merger, first announced in February, aims to create the largest credit card issuer in the U.S., with over $250 billion in outstanding loans, surpassing JPMorgan Chase. Together, the companies would have access to more than 305 million cardholders.
James warned that the merger would solidify Capital One’s status as the largest subprime card issuer in the U.S., giving the combined entity a market share exceeding 30%. It could also help Capital One expand its payment operations, which include Visa and Mastercard-branded cards.
This merger is not only subject to scrutiny from state authorities but also requires approval from shareholders, the Federal Reserve, and the Office of the Comptroller of the Currency. Both Capital One and Discover hope to finalize the deal by early 2025.
In May, James’ office requested that both banks waive confidentiality to allow a thorough review of documents submitted to the Justice Department’s antitrust division. Discover complied, but Capital One declined, arguing that such a waiver would grant New York unlawful “visitorial power” over national banks, prompting the need for the subpoena.
Adding to the complexities, customers have also filed lawsuits against Capital One and Discover, claiming the merger would diminish competition and lead to increased costs for consumers. As this investigation unfolds, many are watching closely to see how it could reshape the future of the credit card industry.
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