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CFPB Head Wary of Big Credit Card Mergers

Discover card and Capital One apps

America’s leading consumer finance watchdog is skeptical about giant mergers between credit card companies.

Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra expressed these worries in a Wednesday (April 24) interview with the Financial Times (FT), at a time when Capital One is working to complete its $35 billion purchase of Discover.

“There will need to be careful scrutiny of two quite large financial institutions, combining them and what might be the effect if they failed,” Chopra said, though the report points out he declined to comment specifically on the Capital One/Discover deal.

“Anytime you’re talking about large players like this merging, one has to not just look at competitive effects, one also has to look at the impact on financial stability.”

Capital One in February announced its plans to acquire Discover in a proposed deal that would bring about a global payments platform with 70 million merchant acceptance points in upwards of 200 countries and territories.

The deal would create the largest U.S. credit card issuer in terms of balances and the sixth-largest bank by assets, and put Capital One in charge of the Discover credit card payment network, the fourth largest such network after Visa, Mastercard and American Express.

Last month, a report by Reuters — citing a source who had seen Capital One’s regulatory application — said that the company argues its purchase of Discover will boost competition.

The filing also contends the deal won’t hurt competition in the credit card market, as the combined company will account for 13% of credit card purchasing volume, which Capital One says is the best measure of credit card share.

While the CFPB can’t block the deal, Chopra told the FT the bureau “is regularly consulted on merger issues.”

And though he didn’t mention the two companies by name, he did make it clear he was concerned about the merger of two “large issuers . . . that compete in a number” of credit card sub-markets, calling it “a very significant transaction.”

PYMNTS looked at the regulatory challenges facing the merger in a February interview with Jim McCarthy, CEO of Thredd.

“There’s going to be a really long runway” on the deal, said McCarthy, “and Capital One has some hard decisions to make about what they will want to be with this combination of assets.”