Capital One’s $35B acquisition of Discover gains regulatory approval

Capital One’s $35 Billion Deal for Discover Clears Regulatory Hurdles

Merger boosts Capital One’s credit card dominance and expands its payment network

Capital One’s $35 billion acquisition of Discover Financial Services has received regulatory approval, moving the merger between two of the largest U.S. credit-card issuers closer to completion. The deal, now expected to close in May pending final conditions, marks a significant consolidation in the consumer finance industry.

Federal banking regulators approved the merger on Friday, contingent on the resolution of pending enforcement actions against Discover, including restitution payments and penalties related to past compliance violations.

Expanded reach and network capabilities for Capital One

With the deal, Capital One not only absorbs a major credit-card competitor but also gains control of Discover’s proprietary card network—one of the few in the U.S. capable of competing with Visa and Mastercard. The combined entity will hold more than $650 billion in assets, further solidifying Capital One’s role as a dominant player in the credit card and payment space.

Capital One stated it plans to retain the Discover brand on both credit cards and its payment network.

Regulatory conditions tied to past Discover violations

The Federal Reserve’s approval was conditional on Capital One addressing Discover’s outstanding enforcement matters. The Fed cited a consent order with Discover that includes a $100 million civil penalty for improperly charging certain interchange fees between 2007 and 2023.

The Federal Deposit Insurance Corp. (FDIC) also issued orders requiring Discover to pay $1.23 billion in restitution to merchants and payment intermediaries affected by the misclassification of credit card accounts—an issue disclosed by Discover in 2023.

The Office of the Comptroller of the Currency echoed the Fed’s stance, requiring Capital One to ensure that Discover resolves all open regulatory actions before the merger is finalized.

“Discover has previewed these orders publicly for several quarters, and they are fully reserved for the fines and restitution,” Capital One said in a statement. “Discover has reached these agreements to address the remaining government inquiries.”

Implications for the broader financial sector

Analysts view the Capital One–Discover merger as a bellwether for future consolidation in the financial sector. With the Trump administration rolling back certain merger oversight rules, dealmakers have been closely watching this high-profile case.

“Our sense was that several executives were watching how the Capital One–Discover process transpired,” said Barclays analyst Jason Goldberg. “The deal’s approval could signal that more financial consolidation is viable under current regulatory leadership.”

However, some experts warn that bank-to-bank mergers could still face stricter scrutiny, and concerns about a potential economic downturn may temper enthusiasm for large-scale transactions.

Discover has faced mounting challenges in recent years, including increased oversight and executive turnover. The company’s internal review found it had misclassified credit-card accounts into a higher pricing tier, prompting compliance investigations and regulatory action.

Despite those hurdles, the merger now appears on track. The final closing, expected in May, depends on full compliance with the outlined regulatory conditions.

Stay tuned to The Horizons Times for updates on financial-sector mergers and the evolving regulatory environment shaping U.S. banking.