In a letter to regulators last week, Capital One rejected criticism of its planned acquisition of Discover Financial and stressed that customers should not expect higher prices because there will continue to be competition.
Opponents of the proposed acquisition of Riverwoods, Illinois-based Discover say the deal will give the combined company an excuse to impose higher fees on consumers and merchants.
In an Aug. 7 letter to the Federal Reserve submitted last week in response to critics of the merger, Capital One, based in McLean, Virginia, said it has an incentive to keep prices competitive.
The $35 billion merger, announced in February, would create the country’s largest credit card company. Regulators are still reviewing whether To approve the deal.
Capital One pointed out that even if the merger is successful, customers will still have a large number of competitors to choose from.
Cap One’s letter does not mention any other companies by name, and a Capital One spokesperson declined to name any, but other major credit card issuers include San Francisco-based Wells Fargo and Stamford, Connecticut Synchrony Finance.
“The ease with which consumers can switch between the wide number of credit card options or other forms of payment or credit available to them, especially in an industry with so many competitors, makes the credit card industry extremely competitive,” the letter said.
This will prevent the merged company from raising prices, Capital One said.
Opponents of the deal also commented on the impact the merger would have on credit card holders from low-income households, as they tend to have lower credit scores.
According to an analysis by the interest group Americans for Financial Reform, the merger would create a company with more than 30% the market for consumers with below-average creditworthiness, leaving these consumers with fewer options.
While Capital One did not directly address these criticisms in the letter, it did say that the company has a long history of working with consumers regardless of their creditworthiness and striving for financial inclusivity.
“We have a long-standing commitment to improving financial literacy and awareness and offer simple and transparent products that help new credit customers build their credit safely and use it wisely,” the letter said.
