NEW YORK (AP) — Capital One said Wednesday it plans to offer $265 billion in lending, investing and philanthropic ventures as part of its pending $35 billion merger with Discover Financial. The plan is designed to appease federal bank regulators, who have initially been skeptical of approving the merger, which would create the world’s largest credit card company if it goes through.
The five-year, $265 billion plan for community benefits consists of several initiatives from Capital One, including a plan to lend $200 billion to low- and middle-income consumers, $44 billion in community development work and hundreds of millions of dollars to small, non-profit organizations. minority-owned businesses and financial institutions.
Announced in February, Capital One said it plans to buy and merge with Discover Financial Services, which will create the nation’s seventh-largest bank as well as the largest credit card company. Capital One would also gain Discover’s payments network, a rare asset.
But regulators have been lukewarm on the deal, and some community and consumer groups have expressed concern or alarm about the size of the combined company, feeling it could reduce competition and how much exposure a combined Capital One-Discover has in the card market. of credit. .
Notably, Capital One is including credit card lending as part of its plan. The McLean, Virginia-based company plans to offer $125 billion in credit card loans to low- and middle-income consumers, as well as $75 billion in auto loans. Historically banks would offer small business lending programs and mortgages, but Capital One does not have a mortgage loan department to do so.
Consumer groups are expected to put heavy pressure on the Biden administration to make sure the deal is good for consumers and shareholders.
“The reason Capital One isn’t making any mortgage commitments here has a dark irony: They walked away from mortgages seven years ago, breaking the promises they made the last time they bluffed regulators into a merger,” said Jesse Van Tol, CEO of the National Community Reinvestment Coalition, a group that often works with banks to develop these community lending programs. NCRC did not work with Capital One on this plan, but has worked with Capital One in the past on similar programs when there were previous mergers.
Capital One said the plan was developed in partnership with the National Association for Latino Community Asset Builders, NeighborWorks America, the Opportunity Finance Network and the Woodstock Institute.
“Throughout this process, we’ve been encouraged by Capital One’s ownership of areas where it has room for improvement and openness to discussing ideas beyond its comfort zone. We look forward to continuing to work together to deliver on the plan’s commitments and help drive capital to the communities that need it most,” said Harold Pettigrew, president and CEO of OFN.
Capital One also pledged not to close any branches as part of the merger and to continue opening more branches in low-income neighborhoods. The bank pledged to keep a third of its branches in low- to moderate-income enrollment tracts, with plans to open more Cafes — a type of branch that acts as a community center, coffee shop and meeting space — in these neighborhood as well.
“This plan offers high-impact, scalable solutions for low- and moderate-income communities, and its commitments and ambition reflect the strong and honest dialogue that drove its development,” said Andres Navarrete, executive vice president and head of external affairs at Capital. One, in a statement.