Federal regulators are considering penalties for Capital One that could make their proposed merger with Discover “unlikely” to be approved according to merger regulators’ official policies, the bank quietly announced Thursday evening.
“Capital One must be awfully scared to try and hide this news by dumping it out days before a crucial election, and while a lot of reporters were getting their kids ready to Trick-or-Treat,” said Jesse Van Tol, President and CEO of NCRC. “And hats off to them: If I found out I was facing federal fines that are also formally acknowledged as grounds for blocking a merger to make me richer, I’d probably be looking to hide too. Four days before the most consequential election in most Americans’ lifetimes is a great time to reveal something you don’t want anyone to see or remember.”
The bank acknowledged that the CFPB has contacted it about potential enforcement action over “online savings accounts that allegedly tricked some consumers into believing they were receiving high rates,” according to one report. Should the CFPB proceed with an enforcement action, it would be the latest in a series of legal violations by the bank in recent years, including a $390 million fine for “willfully failing” to uphold money-laundering laws.
“I look forward to further information from the CFPB about which laws they believe Capital One has broken this time,” Van Tol said. “I look forward to finding out how OCC officials react to it, since they just rewrote their bank merger review policy to note that serial or pending enforcement actions are grounds for blocking a merger.”
The official bank merger policy statement of the Office of the Comptroller of the Currency (OCC) specifically lists reasons that a proposed merger “is unlikely to [receive] approval” from the agency. Two of the reasons it notes as likely grounds for blocking a merger are open or pending consumer compliance enforcement actions and “multiple enforcement actions…in a three-year period.”
“Capital One and its shareholders are right to be scared,” Van Tol said. “But for the rest of the country, this is fantastic news.”
