February 26, 2024

Warren, 12 Lawmakers Call on Regulators to Block Capital One-Discover Merger

Proposed Deal Would Make Capital One the Nation’s 6th Largest Bank, Largest Credit Card Issuer

“This merger is bad for consumers…. In addition to harming consumers and small businesses, bank consolidation poses increased systemic risk in the financial system.”

Text of Letter (PDF) 

Washington, D.C. – U.S. Senator Elizabeth Warren (D-Mass.), a member of the Senate Banking, Housing, and Urban Affairs Committee, and U.S. Representatives Alexandria Ocasio-Cortez (D-N.Y.), Katie Porter (D-Calif.), James McGovern (D-Mass.), Ro Khanna (D-Calif.), Greg Casar (D-Texas), Summer Lee (D-Pa.), Sylvia Garcia (D-Texas), Rashida Tlaib (D-Mich.), Jamaal Bowman (D-N.Y.), Ayanna Pressley (D-Mass.), Jesus G. “Chuy” Garcia (D-Ill.), and Al Green (D-Texas) urged the Office of the Comptroller of the Currency (OCC) and the Federal Reserve (Fed) to block Capital One’s plan to acquire Discover Financial Services (Discover). The letter also expressed concerns with the OCC’s proposed policy statement regarding merger approvals as essentially codifying a permissive approach.

“To protect consumers and financial stability, we urge you to block this merger and strengthen your proposed policy statement to prevent harmful deals in the future,” wrote the lawmakers.

The potential merger, which would combine two of the largest credit card issuers in the United States, would consolidate the credit card market, create the nation’s sixth largest bank, and limit customer choice. The banking and credit card industries are already highly concentrated: today, the six largest bank holding companies control more assets than all other bank holding companies combined.

“This merger announcement comes less than a week after the Consumer Financial Protection Bureau (CFPB) issued a new report revealing the impact of credit card industry consolidation on consumers,” the lawmakers wrote. “According to the report, large banks charge higher interest rates than small credit card issuers, with ‘[n]early half of the largest credit card issuers’ — including Capital One — ‘offering cards with a maximum purchase APR over 30%.’” The CFPB report also found that large credit card issuers charge average fees that are 70% higher than those charged by small institutions.

Additionally, Capital One and Discover have concerning track records of mistreating customers and compliance failures. The lawmakers noted that in 2012, the CFPB ordered Capital One to refund $140 million to 2 million consumers with low credit scores and low credit limits who were misled into paying for costly add-on products. In 2023, Discover was required by the Federal Deposit Insurance Corporation (FDIC) to address “‘violations of, and consumer harm related to’ various consumer financial laws.”

The lawmakers requested that regulators strengthen their review language to ensure that future mergers do not harm consumers and the broader economy, and specifically addressed OCC Acting Comptroller Michael Hsu, who has remarked on the need to scrutinize merger applications to prevent large banks from becoming unmanageable. 

Senator Warren has fought to crack down on financial industry consolidation that threatens  consumers and prices: 

  • In December 2023, Senator Warren led 6 senators in a letter to Acting Comptroller of the Currency Michael Hsu, calling on OCC to allow states to move forward with their efforts to protect consumers from harmful bank practices. The senators criticized the OCC for overstepping its preemption authority under the Dodd-Frank Wall Street Reform and Consumer Protection Act, which the agency is abusing to block tough, state-level consumer protections.

  • In August 2023, chairing a hearing of the Senate Banking, Housing, and Urban Affairs Committee Subcommittee on Economic Policy, Senator Warren highlighted the need for regulators to implement the strongest version of bank merger review guidelines in order to ensure stability in the financial system. 

  • In June 2023, Senator Warren sent a letter to Assistant Attorney General Jonathan Kanter, Federal Deposit Investment Corporation (FDIC) Chairman Gruenberg, Acting Comptroller of the Currency Hsu, Federal Reserve Vice Chair for Supervision Michael Barr, and Treasury Secretary Janet Yellen, urging regulators to promote greater competition in the banking sector by toughening their stances on bank mergers and strengthening bank merger review guidelines.

  • In May 2023, at a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren questioned Acting Comptroller Hsu on his decision to approve JPMorgan Chase’s purchase of First Republic Bank after its collapse. This merger allowed a large, poorly supervised bank to be swallowed by America’s largest bank, making it $200 billion larger than it was before.

  • In May 2023, Senator Warren sent a letter to Acting Comptroller Hsu and FDIC Chair Gruenberg, questioning the terms of the sale of First Republic Bank to JP Morgan Chase and the rationale behind the OCC and FDIC’s approval of the deal. 

  • In December 2022, Senators Warren and Tina Smith (D-Minn.) sent letters to three key banking regulators: the Federal Reserve, FDIC, and the OCC, raising concerns about the ties between the banking industry and crypto firms following FTX’s bankruptcy. The senators asked each regulator how they assessed the banking system’s exposure to crypto risks. 

  • In December 2022, Senator Warren and Representative Ilhan Omar (D-Minn.) sent a letter to the heads of all U.S. banking regulators, including Acting Comptroller Hsu, calling on them to improve banking access for immigrant communities and communities of color.  

  • In August 2022, Senators Warren, Dick Durbin (D-Ill.), Whitehouse, and Bernie Sanders (I-Vt.) sent a letter to the OCC, calling on it to rescind the previously issued cryptocurrency guidance and replace it with more comprehensive guidance, in coordination with other prudential regulators.