18 Consumer Groups Oppose Proposed Capital One and Discover Merger

 

A coalition of 22 advocacy groups warned in a letter to Jerome Powell, the Fed chair; Martin Gruenberg, chair of the Federal Deposit Insurance Corp; Michael Hsu, acting comptroller of the currency; and Jonathan Kanter, assistant attorney general at the Department of Justice (DOJ), that the merger would "further concentrate risk" in the financial system and should be stopped. They urged regulators to block Capital One’s $35bn takeover of Discover. Urging the Federal Reserve and DOJ to intervene, the coalition stated that combining two of the largest US credit card companies would damage competition, and permit Capital One to hike fees after closing the acquisition, announced by the companies last month.

Signatories included the National Community Reinvestment Coalition (NCRC), the American Economic Liberties Project (AELP), Public Citizen, and Americans for Financial Reform.

In a statement, a Capital One spokesman said it had a “long history” of serving consumers and businesses with “best-in-class” products and services. “As this process moves forward, we are fully committed to engaging with consumer organizations and other stakeholders to demonstrate the significant benefits of this transaction to consumers, communities, and competition in the marketplace.”

The NCRC responded that “Capital One is a notorious bad actor, even at its current size, and should not be allowed to further concentrate market power.” Capital One is one America’s biggest banks, and a key issuer of Visa and MasterCard credit cards in the US. Discover, with 305 million global cardholders, is one of the largest card payment networks in the US.

While Capital One argues that the merger would enable it to “build a payments network that can compete” with the market’s largest players, the AELP pointed out that “Vague claims that the merger will benefit competition in payment networks are a Trojan Horse concealing the merger’s real goals: higher interchange fees, more costly credit cards, and a surge in size connoting an implicit too-big-to-fail government backstop. It might be lucrative for Capital One, but everyone else will pay.”

Capital One expects to close the deal by late 2024 or early 2025, subject to regulatory and shareholder approvals. 

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Read the March 6, 2024 Guardian article.

Read the March 6, 2024 NCRC article.

The Fed declined to comment.

 Community Reinvestment Act

Advocates Urge FinWise Bank FDIC Downgrade for Predatory Lending

 A coalition of consumer advocates have submitted a letter to the Federal Deposit Insurance Corporation (FDIC) calling for the downgrade of the Bank because of Community Reinvestment Act (CRA) violations. They argue that FinWise Bank’s lending through American First Finance, Elevate, and Opportunity Financial (OppFi), offering loans at up to 160% APR, "raises serious consumer protection issues and fails to meet the convenience and needs of the communities it serves." Under FDIC rules, banks are responsible for risks arising from third-party relationships to the same extent as if the activity were handled by the bank.

The advocates’ comments pointed out that American First Finance has twice as many complaints to the Consumer Financial Protection Bureau (CFPB) as EasyPay, whose partner Transportation Alliance Bank was downgraded by the FDIC in early 2023 because or deceptive acts/practices by a partner, probably EasyPay Finance. FinWise Bank’s partner American First Finance operates similar to EasyPay Finance, providing predatory puppy loans and other deceptive, high-cost loans through retail stores for pets, furniture, auto repairs, and appliances.

Two of FinWise Bank’s other rent-a-bank lenders, Elevate and OppFi, have rates significantly over 50% for charge-offs, a measure of debts unlikely to be collected, showing high-rates of default and the predatory nature of their loans. FinWise Bank, chartered in Utah and FDIC supervised, is one of only a few rogue banks that front for predatory lenders. Most states have interest rate limits to stop predatory lending, but predatory lenders try to evade state laws by laundering their loans through banks, which are exempt from state rate caps.

The advocates submitted public comments evidenced how FinWise Bank partners American First Finance, Elevate, and OppFi have generated hundreds if not thousands of complaints to the Consumer Financial Protection Bureau (CFPB) about: (1) Deception and unaffordable interest rates on loans that borrowers are unable to repay; (2) Receiving loans that they never applied for and identity theft; (3) Improper debt collection tactics, including collecting debt not owed, failure to validate debts, harassment, and abuse; and (4) Credit reporting problems, including incorrect information and failure to respond to disputes and errors.

The letter was signed by Accountable.US, Americans for Financial Reform, Center for Responsible Lending, Consumer Action, Consumer Federation of America, National Community Reinvestment Coalition, NCLC (on behalf of our low-income clients), Public Citizen, U.S. PIRG, and Woodstock Institute.

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Read the March 15, 2023 Consumer Federation of America release.