New York Attorney General Letitia James is investigating Capital One Financial Corp.’s proposed $35 billion acquisition of Discover Financial Services, saying the deal would have a “significant impact” on consumers in the state. James has asked a state court for permission to issue subpoenas to Capital One as part of an ongoing antitrust probe by the state.
Capital One and Discover have more than $16 billion in combined credit card loans in New York, making the state particularly impacted by the deal. The combined company would be the largest credit card issuer, with $250 billion in outstanding credit card loans. Capital One is also the largest issuer of credit cards to customers with subprime credit scores.
The US Justice Department is already reviewing the proposed deal. James said she asked both Capital One and Discover in May to voluntarily waive federal confidentiality protections to allow the Justice Department and her office to share documents and information. While Discover agreed to a waiver, Capital One did not.
Capital One said it can’t voluntarily cooperate with the New York investigation under federal banking regulations. But the state said those regulations don’t bar a court order allowing subpoenas to be served on Capital One. Capital One said it was confident the merger would ultimately win regulatory approval and prove beneficial to consumers.
The proposed merger was announced in February, and it was the biggest in the world at the time. Capital One Chief Executive Officer Richard Fairbank said it was a “singular opportunity” to bring together two companies that can compete with the largest payment networks. However, the attorney general noted that the combined company would be especially dominant among subprime consumers, with a 30% market share, double its closest competitor, making the effects of the deal “particularly felt by the often vulnerable New Yorkers.”
Earlier in the year, Democrats in the US Senate expressed concern about the deal’s size, with Ohio’s Sherrod Brown, chair of the Senate Banking Committee, taking a dim view of it and Elizabeth Warren of Massachusetts expressing outright opposition.
Capital One shares were down 1% at mid-afternoon Wednesday, while Discover fell 1.1%. Discover declined to comment.
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