Capital One pushed back on criticism of its proposed acquisition of Discover in a letter to regulators last week, insisting that customers won’t see higher prices because it will still face competition.
Opponents of financial institutions’ potential tie-up say the deal will give the combined company an excuse to charge higher fees to consumers and merchants.
In an Aug. 7 letter to officials at the Richmond Fed and the Office of the Comptroller of the Currency, McLean, Virginia-based Capital One said it has incentive to keep prices competitive.
The proposed $35.3 billion deal, announced in February, would create the nation's largest credit card company. Regulators are still considering whether to approve the deal.
Capital One noted that it will still have plenty of competitors for customers to choose from if the merger goes through.
Capital One’s letter doesn’t mention other companies by name, and a spokesperson for the bank declined to list any, but other major credit card issuers Citi, JPMorgan Chase, Wells Fargo and Synchrony Financial.
"The ease with which consumers can switch between the very large number of options for credit cards or other forms of payment or credit that they have access to, particularly in an industry with so many competitors, makes the credit card industry highly competitive," Capital One said in its letter. This will discourage the combined entity from raising prices, the bank added.
Opponents of the deal have also sounded off about the impact the merger would have on credit cardholders in low-income households, which tend to have lower credit scores.
According to an analysis by the advocacy group Americans for Financial Reform, the merger would create a company with more than 30% of the market for consumers with nonprime credit scores, leaving those consumers with fewer options.
Capital One's letter did not directly address that criticism, but it affirmed the company has a history of working with consumers regardless of credit history, and strives for financial inclusiveness.
"We have a long-standing commitment to improving financial literacy and awareness and provide simple and transparent products to help new-to-credit customers build their credit safely and use it wisely," Capital One said in the letter.
