$35B Capital One-Discover merger closes

McLean-based Capital One Financial completed its $35.3 billion acquisition of Discover Financial Services in May, finalizing the merger of the credit card giants announced last year.

On April 18, Capital One received approval from the Federal Reserve and the Office of the Comptroller of the Currency to purchase Illinois-based Discover. The deal was announced in February 2024, and in December, shareholders at both companies approved it.

“This deal brings together two innovative, mission-driven companies that together are poised to deliver breakthrough products and experiences to consumers, businesses and merchants,” Capital One Founder and CEO Richard D. Fairbank said in a statement.

The all-stock acquisition, Capital One’s largest ever purchase, was under regulatory scrutiny. Two Capital One cardholders filed a federal class action lawsuit against Discover and Capital One in July 2024, claiming the megadeal would violate antitrust law, but the case was paused in October 2024, pending further action by the U.S. District Court for the Eastern District of Virginia.

In July 2024, Capital One committed to spend $265 billion over five years on lending, philanthropy and investment if the deal went through. Just before the closing of the deal, Capital One agreed to pay $425 million to settle with customers who were suing the bank, accusing it of cheating them out of higher interest rates applicable to the 360 Performance Savings account.

At the last minute, U.S. Sen. Elizabeth Warren, D-Massachusetts, wrote to the Department of Justice, calling on its antitrust division to block the transaction.

“Visa and Mastercard, which have enjoyed a duopoly, have a long history of alleged coordination, resulting in higher fees for customers and merchants,” Warren wrote. “Capital One has stated that it will move some, but not all, of its credit card volume to the Discover network, meaning it will be negotiating its interchange fees as a credit card issuer with Visa and Mastercard, while separately setting interchange fees on its own network. That is a recipe for coordination among the three networks.”

Gail Slater, the DOJ’s antitrust czar, determined that she didn’t have enough evidence to challenge the deal in court, according to media reports.

Three former Discover board members now serve on Capital One’s board of directors, as it expands from 12 members to 15. Capital One also intends to continue offering Discover-branded credit cards, in addition to Capital One cards.