Maybe this is why Elizabeth Warren was so quick to protest the Capital One/Discover merger...
In an open letter out days ago Sen. Elizabeth Warren was quick to urge regulators to block the pending Capital One/Discover merger. In her letter, penned alongside other anti-corporate members of congress like AOC and Ro Khanna, she wrote that: “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.”
“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%," her letter says.
It continues: "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.”
And now, speaking of compliance failures, PYMNTS and FT have reported that JP Morgan was actually the first bank to try and make a deal for Discover.
J.P. Morgan Chase considered acquiring Discover Financial before Capital One finalized a $35 billion deal for the company, the report says. The bank explored the acquisition for about a year to expand beyond traditional card networks but abandoned the plan due to challenges, including convincing Discover and facing regulatory hurdles.
“This would’ve been a truly company-changing deal,” a source told FT.
Sources told FT that Dimon's firm started looking at its bid for the company in the middle of 2021, but a year later has abandoned plans, as it was unable to convince Discover of the plan.
Capital One's acquisition of Discover, announced last month, aims to create a global payments network. This move could significantly impact the banking sector, especially in catering to Americans living paycheck to paycheck, a demographic that represents a large portion of the population across various income levels. The deal's approval by regulators remains uncertain, with concerns about market concentration in the card issuing and payment networks sectors.
And call us curious, but we can't help but wonder what Sen. Warren's take would have been if her crypto loathing pal Jamie Dimon had been first to make a play at Discover...
