Capital One wraps up Discover arrangement, consents to a $425M settlement
**Capital One Completes $35.3 Billion Acquisition of Discover, Amidst Settlements and Regulatory Scrutiny**
In a significant move in the banking sector, Capital One has officially completed its acquisition of Discover Financial Services, creating the nation's largest credit card issuer. The deal, valued at $35.3 billion, was approved by the Federal Reserve and the Office of the Comptroller of the Currency (OCC) in April 2025, after facing regulatory scrutiny and legal challenges throughout the year.
The acquisition, announced in February 2024, was met with a federal class-action lawsuit in July 2024, alleging the merger could reduce competition and violate antitrust laws. However, the lawsuit was paused, and ultimately, the U.S. Department of Justice decided not to challenge the deal.
Just before closing, Capital One agreed to settle a $425 million lawsuit with customers who alleged being cheated out of higher interest rates on a particular savings account product. The settlement, part of managing litigation risk related to Discover’s prior account practices, will see class members receiving payments based on the amount of interest they would have earned if their 360 Savings account had paid the same interest rate as 360 Performance Savings accounts.
As part of the settlement, Capital One will maintain an interest rate on its 360 Savings accounts that is double the Federal Deposit Insurance Corp.'s (FDIC) calculation of the national average for savings deposit accounts for the settlement's remaining part. The company must also submit a plan, within 120 days, on the actions it plans to take to address the causes of the enforcement actions against Discover.
The OCC's approval of the acquisition hinges on this plan and the timeline. In addition, Capital One has committed to spending $265 billion over five years on lending, philanthropy, and investment to help satisfy regulatory concerns about the deal’s impact on consumers and lending markets.
Capital One's assets will boost to around $660 billion, making it the nation's eighth-largest bank. The acquisition will also give Capital One access to Discover's network, one of the few major U.S. payments networks outside Visa and Mastercard.
The acquisition, the richest banking deal of the past six years, has not been without controversy. The Fed fined Discover $100 million over a pricing misclassification issue that has plagued the company for years. Additionally, the Consumer Financial Protection Bureau (CFPB), under a newly reelected Donald Trump, dismissed a similar lawsuit in February. However, the Biden-era CFPB alleges Capital One "cheat[ed] millions of consumers out of more than $2 billion in interest."
New York Attorney General Letitia James has also sued Capital One over the same savings accounts. The FDIC issued three orders against Discover last month, including one carrying a $150 million fine, one requiring the company to distribute at least $1.225 billion in restitution to overcharged customers, and one amending its 2023 consent order related to the price misclassification issue.
Following the acquisition, Capital One decided to wind down Discover's home equity lending business, maintaining servicing but exiting new originations. Capital One has also reiterated its commitment to implementing the five-year, $265 billion community benefits plan it announced last July.
[1] Business Insider. (2025). Capital One's acquisition of Discover is finally official. Here's what you need to know. [online] Available at: https://www.businessinsider.com/capital-ones-acquisition-of-discover-is-official-heres-what-you-need-to-know-2025-5
[2] The Wall Street Journal. (2025). Capital One Completes Discover Acquisition. [online] Available at: https://www.wsj.com/articles/capital-one-completes-discover-acquisition-11626941400
[3] CNBC. (2025). Capital One completes $35 billion acquisition of Discover. [online] Available at: https://www.cnbc.com/2025/05/18/capital-one-completes-35-billion-acquisition-of-discover.html
[4] Reuters. (2025). U.S. DOJ says it will not challenge Capital One's $35 billion Discover deal. [online] Available at: https://www.reuters.com/business/finance/us-doj-says-it-will-not-challenge-capital-ones-35-billion-discover-deal-2025-04-18/
- Despite facing regulatory scrutiny, legal challenges, and settlements, Capital One successfully completed its $35.3 billion investing in Discover Financial Services, a move that significantly impacted the finance sector and created the nation's largest credit card issuer.
- In the broader context of business, politics, and general-news, the acquisition of Discover by Capital One, amidst settlements and regulatory scrutiny, raises questions about competition, antitrust laws, and the potential impact on consumers and lending markets.
