Consumer advocate Lisa McCormick denounces potential credit merger

Consumer advocate Lisa McCormick, a prominent New Jersey Democrat, is strongly objecting to the potential merger of Capital One and Discover Financial Services, which would create what she called "another too-big-to-fail bank."

The proposed merger would result in the creation of the largest credit card lender in the United States by balance owed, sparking significant concerns regarding reduced competition and its detrimental effects on consumers.

McCormick warns that the merger could lead to higher interest rates, increased fees, and a diminished array of choices for consumers in the credit card market.

"With the consolidation of two major players in the industry, smaller competitors may face significant challenges in maintaining competitiveness, potentially resulting in reduced innovation and consumer-friendly practices," said Lisa McCormick.

Capital One Financial Corporation is a financial holding company that had $348.4 billion in deposits and $478.5 billion in total assets as of December 31, 2023. As of September 2023, the digital banking and payment services company Discover Financial Services had $143.43 billion in total assets.

One of only four major card networks, along with Visa, and Mastercard, which process nearly $10 trillion in the U.S. between them and American Express, the Discover network carried $550 billion in transactions last year.

"The proposed merger between Capital One and Discover Financial Services also raises serious antitrust concerns and threatens to significantly hinder competition within the credit card industry," said Lisa McCormick. "The resulting entity would wield unprecedented market power, which could ultimately harm consumers by limiting their options and subjecting them to less favorable terms and conditions."

McCormick emphasized the importance of preserving a competitive landscape within the credit card industry to ensure that consumers have access to affordable and diverse financial products. She urges regulatory authorities to scrutinize the proposed merger closely and take appropriate measures to safeguard consumer interests and promote fair competition.

"Allowing such a merger to proceed unchecked would undermine the principles of competition and consumer choice that are essential for a healthy and dynamic marketplace," McCormick added. "It is imperative that regulators thoroughly assess the potential anticompetitive effects of this merger and take decisive action to prevent harm to consumers."

There are currently four U.S. credit card networks: Visa, Mastercard, American Express, and Discover.

The largest of these, Visa and Mastercard, are known as “four-party” networks because they act as agents for thousands of card-issuing banks and mandate the fees and terms that the banks receive from merchants for each transaction.

Merchants have effectively no leverage to negotiate costs in four-party network systems because they cannot risk losing access to all the consumers served by Visa’s and Mastercard’s member banks.

Visa and Mastercard wield enormous market power in credit cards; according to the Federal Reserve, they account for nearly 576 million cards or about 83 percent of general-purpose credit cards.

Visa’s and Mastercard’s market power and network structure have enabled them to impose fees on U.S. merchants that are among the world’s highest, charging a total of $93 billion in U.S. merchant credit card fees in 2022.

These fees include interchange or swipe fees which Visa and Mastercard require merchants to pay to issuing banks, as well as network fees that Visa and Mastercard require merchants to pay directly to them. Consumers ultimately pay for all of these fees in the price of the goods and services they buy.

"Regulators and lawmakers must ensure that this merger doesn’t enrich shareholders and executives at the expense of small businesses, consumers and our broader economy," said Lisa McCormick.

As the debate surrounding the proposed merger intensifies, Lisa McCormick vowed to continue advocating for policies that prioritize consumer welfare and foster a competitive environment in the financial services sector.