ReportWire

Tag: Discover Financial Services

  • Earnings will drive the stock market in the week ahead. That’s a good thing

    Earnings will drive the stock market in the week ahead. That’s a good thing

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    A view of the New York Stock Exchange building in the Financial District in New York City on Aug. 5, 2024.

    Charly Triballeau | Afp | Getty Images

    The good times are still rolling on Wall Street. An intensifying earnings season will put that momentum to the test.

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  • Justice Department accuses Visa of debit network monopoly that affects price of ‘nearly everything’

    Justice Department accuses Visa of debit network monopoly that affects price of ‘nearly everything’

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    Justin Sullivan | etty Images

    The U.S. Justice Department on Tuesday sued Visa, the world’s biggest payments network, saying it propped up an illegal monopoly over debit payments by imposing “exclusionary” agreements on partners and smothering upstart firms.

    Visa’s moves over the years have resulted in American consumers and merchants paying billions of dollars in additional fees, according to the DOJ, which filed a civil antitrust suit in New York for “monopolization” and other unlawful conduct.

    “We allege that Visa has unlawfully amassed the power to extract fees that far exceed what it could charge in a competitive market,” Attorney General Merrick Garland said in a DOJ release.

    “Merchants and banks pass along those costs to consumers, either by raising prices or reducing quality or service,” Garland said. “As a result, Visa’s unlawful conduct affects not just the price of one thing — but the price of nearly everything.”

    Visa and its smaller rival Mastercard have surged over the past two decades, reaching a combined market cap of roughly $1 trillion, as consumers tapped credit and debit cards for store purchases and e-commerce instead of paper money. They are essentially toll collectors, shuffling payments between banks operating for the merchants and for cardholders.

    Visa called the DOJ suit “meritless.”

    “Anyone who has bought something online, or checked out at a store, knows there is an ever-expanding universe of companies offering new ways to pay for goods and services,” said Visa general counsel Julie Rottenberg.

    “Today’s lawsuit ignores the reality that Visa is just one of many competitors in a debit space that is growing, with entrants who are thriving,” Rottenberg said. “We are proud of the payments network we have built, the innovation we advance, and the economic opportunity we enable.”

    More than 60% of debit transactions in the U.S. run over Visa rails, helping it charge more than $7 billion annually in processing fees, according to the DOJ complaint.

    The payment networks’ decades-old dominance has increasingly attracted attention from regulators and retailers.

    Litany of woes

    In 2020, the DOJ filed an antitrust suit to block Visa from acquiring fintech company Plaid. The companies initially said they would fight the action, but soon abandoned the $5.3 billion takeover.

    In March, Visa and Mastercard agreed to limit their fees and let merchants charge customers for using credit cards, a deal retailers said was worth $30 billion in savings over a half decade. A federal judge later rejected the settlement, saying the networks could afford to pay for a “substantially greater” deal.

    In its complaint, the DOJ said Visa threatens merchants and their banks with punitive rates if they route a “meaningful share” of debit transactions to competitors, helping maintain Visa’s network moat. The contracts help insulate three-quarters of Visa’s debit volume from fair competition, the DOJ said.

    “Visa wields its dominance, enormous scale, and centrality to the debit ecosystem to impose a web of exclusionary agreements on merchants and banks,” the DOJ said in its release. “These agreements penalize Visa’s customers who route transactions to a different debit network or alternative payment system.”

    Furthermore, when faced with threats, Visa “engaged in a deliberate and reinforcing course of conduct to cut off competition and prevent rivals from gaining the scale, share, and data necessary to compete,” the DOJ said.

    Paying off competitors

    The moves also tamped down innovation, according to the DOJ. Visa pays competitors hundreds of millions of dollars annually “to blunt the risk they develop innovative new technologies that could advance the industry but would otherwise threaten Visa’s monopoly profits,” according to the complaint.

    Visa has agreements with tech players including Apple, PayPal and Square, turning them from potential rivals to partners in a way that hurts the public, the DOJ said.

    For instance, Visa chose to sign an agreement with a predecessor to the Cash App product to ensure that the company, later rebranded Block, did not create a bigger threat to Visa’s debit rails.

    A Visa manager was quoted as saying “we’ve got Square on a short leash and our deal structure was meant to protect against disintermediation,” according to the complaint.

    Visa has an agreement with Apple in which the tech giant says it will not directly compete with the payment network “such as creating payment functionality that relies primarily on non-Visa payment processes,” the complaint alleged.

    The DOJ asked for the courts to prevent Visa from a range of anticompetitive practices, including fee structures or service bundles that discourage new entrants.

    The move comes in the waning months of President Joe Biden‘s administration, in which regulators including the Federal Trade Commission and the Consumer Financial Protection Bureau have sued middlemen for drug prices and pushed back against so-called junk fees.

    In February, credit card lender Capital One announced its acquisition of Discover Financial, a $35.3 billion deal predicated in part on Capital One’s ability to bolster Discover’s also-ran payments network, a distant No. 4 behind Visa, Mastercard and American Express.

    Capital One said once the deal is closed, it will switch all its debit card volume and a growing share of credit card volume to Discover over time, making it a more viable competitor to Visa and Mastercard.

    Don’t miss these insights from CNBC PRO

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  • Gen AI reduces agent response time by 70% at Discover | Bank Automation News

    Gen AI reduces agent response time by 70% at Discover | Bank Automation News

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    Discover Financial Services is tapping generative AI to speed up call center agent response and strengthen client experience.  Using Google Cloud’s AI platform, Vertex AI, Discover has reduced response times for call center agents by 70%, Szabolcs Paldy, senior vice president of enterprise operations at Discover, told Bank Automation News. Questions in the call center […]

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    Whitney McDonald

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  • Domino’s Pizza, Beyond Meat fall; Chuy’s, Warner Bros. rise; Thursday, 7/18/2024

    Domino’s Pizza, Beyond Meat fall; Chuy’s, Warner Bros. rise; Thursday, 7/18/2024

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    Stocks that traded heavily or had substantial price changes on Thursday:

    Chuy’s Holdings Inc. (CHUY), up $12.07 to $37.34.

    The Tex-Mex chain agreed to be acquired by Darden Restaurants in a deal valuing the company at $605 million.

    Domino’s Pizza Inc. (DPZ), down $64.23 to $409.04.

    The pizza chain suspended a forecast of the number of stores it will open globally over the long term.

    D.R. Horton Inc. (DHI), up $15.91 to $173.42.

    The homebuilder reported stronger profit and revenue for the spring than analysts expected.

    Beyond Meat Inc. (BYND), down 74 cents to $6.43.

    The plant-based food maker is discussing a balance-sheet restructuring with bondholders, according to a Wall Street Journal report.

    Discover Financial Services (DFS), up $1.48 to $142.89.

    The credit card company’s quarterly results easily surpassed analysts’ estimates.

    Warner Bros. Discovery Inc. (WBD), up 20 cents to $8.52.

    The owner of CNN and HBO is drafting a plan to split up, the Financial Times reported.

    Alaska Air Group Inc. (ALK), down $2.78 to $37.25.

    The airline lowered its full-year earnings forecast.

    Leslie’s Inc. (LESL), down $1.25 to $2.83.

    The pool and spa care company predicted results for its current quarter that were far below what the market was expecting.

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  • Regulatory pitfalls abound in Capital One’s bid to buy Discover

    Regulatory pitfalls abound in Capital One’s bid to buy Discover

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    Federal regulators might find reasons beyond antitrust concerns to block the Capital One-Discover merger.

    Adobe Stock

    As federal regulators review Capital One’s merger application to buy Discover Financial Services, they will need to untangle a host of regulatory issues, across multiple competitive dimensions. All of this will be done against the backdrop of fierce criticism of the deal from powerful coalitions in Washington. 

    The regulators that are most likely to have the power to scuttle the acquisition are the Federal Reserve and the Office of the Comptroller of the Currency under federal banking laws and the Department of Justice under antitrust statutes. The likelihood of approval will depend on their relative satisfaction with whether the transaction will not substantially lessen competition and how a combined Capital One-Discover would prevent damage to the broader economy in the event of its failure or financial distress. 

    Capital One is subject to examination and regulation by the Federal Reserve and the OCC. The banking regulators work in parallel with the DOJ when evaluating bank mergers. But if they disagree over the competitive effects of the transaction, the DOJ may still challenge the proposal in court, though these disagreements are rare. The DOJ and the banking agencies both assess the competitive effects of the proposal, but the banking agencies also take into account other banking-specific factors, including the supervisory views of other agencies, such as the Consumer Financial Protection Bureau, and whether the merger could increase risk to the stability of the U.S. financial system. 

    Although the DOJ released revised merger guidelines that shift away from completely relying on the concepts of “horizontal” and “vertical” mergers, that framework is still helpful. “Horizontal mergers” refer to mergers that occur between firms in the same industry, and “vertical mergers” refer to mergers that occur between companies at different stages of the production process. The deal has components of both and they should be analyzed separately. 

    Capital One and Discover are both credit card issuers, which has horizontal merger implications. Capital One would become the largest credit card issuer in the country, with a 22% market share. There are at least a dozen sophisticated, well-capitalized businesses competing as credit card issuers. Federal regulators may conclude that there is insufficient evidence that the merger should be blocked over antitrust concerns. 

    But federal regulators might find other reasons to block the deal. Discover is a payment network, which has vertical merger implications. In its updated merger guidelines, one of the factors the DOJ considers in assessing whether a merger could substantially lessen competition is if there is an industry trend toward consolidation. There is a reasonable possibility that Capital One’s purchase entices American Express to seek a buyer in the long term. In addition to its plans to migrate all of its debit spend away from Mastercard’s network, Capital One is also considering moving its credit spend as well. That would total possibly $606 billion dollars worth of credit card volume moving to Discover’s payment rails. 

    Any increase in revenue as a result of fees charged to new cardholders, more processing activity from merchants or income from any applicable customers in the broader payments ecosystem could significantly increase Discover’s ability to invest in upgrades and enhancements that improve its service. While it is unlikely Discover will ever exceed Mastercard or Visa in market share given the scale of their respective networks and their significant lead in overseas markets, Discover may become the third largest credit card network in the United States, overtaking American Express. 

    Regulators should also gather information about whether the merger would bring any decrease in credit and debit swipe fees charged to merchants and assess if Discover will continue to be exempt from rules that cap debit interchange pricing set by the Durbin Amendment. 

    Additionally, regulators should evaluate Discover’s supervisory records with the CFPB, which has issued multiple consent orders against Discover for issues in student loan servicing. They should also question plans to improve Discover’s compliance with consumer protection laws, as required by a consent agreement with the Federal Deposit Insurance Corp. 

    Regulators should also determine whether the failure of the combined company could inflict damage on the broader economy. Under the Dodd-Frank Act, Capital One must create a living will that describes how it would address bankruptcy or dissolution. The Federal Reserve recently extended the deadline for a living will to March 31, 2025. 

    But given the overlapping timelines for the merger and the new deadline, federal banking regulators should explore whether Capital One can proactively describe how the combined entity would handle financial stress. Importantly, regulators would need to ensure the American people do not pay for it. 

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    Ravieshwar Singh

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  • Wells Fargo kicks off our bank earnings Friday. Rate cuts and dealmaking will be in focus this season

    Wells Fargo kicks off our bank earnings Friday. Rate cuts and dealmaking will be in focus this season

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    A woman walks past Wells Fargo bank in New York City, U.S., March 17, 2020.

    Jeenah Moon | Reuters

    What a difference a year makes.

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  • Even before Fed cuts rates, banks trim what they pay for deposits

    Even before Fed cuts rates, banks trim what they pay for deposits

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    Ally Financial and Discover Financial Services are among the online banks that have recently lowered the rates they pay on high-yield savings accounts.

    Bloomberg

    The war for consumers’ cash has reached a detente, with banks taking a less aggressive approach to gathering deposits and starting to cut the interest rates they pay.

    The rate reductions, which are providing some relief from what has been a bruising battle for deposits over the past year, are coming even though the Federal Reserve hasn’t yet cut interest rates.

    The latest action came at Goldman Sachs’ consumer deposit arm Marcus, which last week cut the rate on its high-yield savings account from 4.5% to 4.4%. The online-only banks Ally Financial and Discover Financial Services also recently made their high-yield savings accounts a little less high-yielding, lowering their rates to 4.25%.

    Traditional branch-based banks are also shifting gears ahead of Fed rate cuts. Last year, they ratcheted up the rates they paid on certificates of deposit, but now they’re starting to lower them a bit. And instead of locking up customers’ money for a year or so, they’re shortening the terms of CDs to just a few months.

    “They don’t see the need to be that aggressive,” said Ken Tumin, the founder of DepositAccounts.com.

    So far, the moves aren’t all that big. High-yield savings accounts at large online banks paid about 4.43% on average this month, a tiny decrease from 4.49% earlier this year, according to a DepositAccounts.com index. Investors will get a fuller picture of deposit costs starting Friday, when banks begin reporting their quarterly earnings.

    Online banks appear to be testing the waters and seeing whether they can lower rates just enough to save some money without majorly disappointing customers. Traditional branch-based banks have long relied on the “inertia” of depositors, who may not be willing to go through the process of shifting their cash to a higher-paying institution, Tumin said.

    The “more mature online banks are in the same boat now,” Tumin said, while newer online competitors are chasing after each other in the “rate-leader game.” Several newer online banks still pay upwards of 5%, significantly above Marcus, Discover, Ally and others that have long offered high-yield savings accounts.

    For some consumers, opening a new account at a higher-paying bank is much like driving 10 minutes to save a little money on gas, said Adam Stockton, head of retail deposits and lending at the consulting firm Curinos. Doing so requires research, transferring funds and keeping track of a new username and password, he noted.

    Also contributing to the inertia is the fact that those customers may be happy with their online banks’ services, he noted. Some deposit customers may have credit cards or auto loans with their online bank, or they may like certain apps or features that help them budget.

    “Once people start using the tools and get everything set up and find a bank that they’re comfortable with, then they do value the stability,” Stockton said.

    Online banks are also cutting the rates they pay on certificates of deposit, reflecting the less competitive environment for CDs across the industry. For one-year CDs, the average rate at prominent online banks fell this month to 4.94%, down from 5.35% in January, according to DepositAccounts.com.

    Rates on traditional brick-and-mortar banks’ CDs are falling a bit as well. It’s yet another sign that the peak of rate pressures, when depositors were asking for higher payouts, has passed.

    Last year, some banks acted defensively, paying up to keep their customers happy rather than see them head out the door — a prospect that became more sensitive after Silicon Valley Bank’s failure.

    Funding worries have since died down, but many banks still see a need to fight for deposits, since industrywide deposit levels have somewhat flatlined. Few banks are targeting double-digit loan growth these days, but they need fresh cash for those new loans they’re making.

    “There is still a need for deposits and concern about where deposit levels could go, which I think is part of the reason that we haven’t seen very many aggressive rate cuts,” Stockton said, noting that the moves so far have been “measured’ and aimed at balancing deposit retention with growth.

    One action that banks took last year to lock up much-needed deposits was offering CDs that lasted about a year — and paying rates of 4.5% or higher. Banks are now less interested in locking up money for that long at that price.

    Instead, they’re gearing their CDs toward terms of just a few months. That strategy gives them more flexibility to reprice CDs downwards if the Fed lowers interest rates this year, a prospect that remains likely, even though investors are increasingly calling it into question.

    JPMorgan Chase, for example, is now paying a higher promotional rate on two-month CDs than on CDs of other lengths. Pittsburgh-based PNC Financial Services Group is focused more on four-month CDs, while Regions Financial is looking to draw in five-month CDs.

    “They’re getting shorter, which means that’s going to cost them less,” Tumin said.

    In February, 72% of the new CDs that branch-based banks booked lasted less than a year, up from 37% a year earlier, according to a deposit tracker from Curinos. Very few banks want to lock themselves into long-term CDs at today’s rates, with just 2% booking new CDs of two years or longer in February. The tracker analyzes data from 40 leading banks.

    All the shifts in banks’ consumer deposit strategies are aimed at protecting their profit margins, which have been “getting squeezed” for the past year, Stockton said.

    Banks’ net interest margins, which measure the difference between their interest income and interest expenses, have fallen as depositors seek higher rates for the cash they park at the bank.

    Lenders have been able to blunt the impact on their margins by charging higher rates on their loans, but that revenue boost is diminishing at some banks. Many loans have already repriced to today’s higher rates, and the modest loan growth that some banks are settling for this year will give them a smaller pool of loans to earn interest on.

    Keeping deposit costs down is critical at this stage of the economic cycle, according to Stockton, since rates have flatlined and margins are under pressure.

    “The end of a rising rate cycle has historically been one of the more challenging environment banks, and this is no exception,” Stockton said.

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    Polo Rocha

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  • CNBC Select’s best long-term personal loans of 2024

    CNBC Select’s best long-term personal loans of 2024

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    Personal loan repayment terms often range between two to five years. However, some lenders offer terms that are longer than that — sometimes as long as 12 years.

    A longer repayment term means more time to repay your balance and, as a result, likely smaller monthly payments. On the flip side, a longer term could mean spending more on interest over the life of the loan, so it’s important to choose a lender that offers lower interest rates and doesn’t charge early payoff or prepayment penalties in case you decide to repay the balance quicker.

    With that in mind, here are CNBC Select’s picks for 2024’s best personal loan lenders that offer longer loan terms. We considered key factors like interest rates, fees, loan amounts and, of course, term lengths offered, plus other features including how your funds are distributed, autopay discounts, customer service and how fast you can get your funds. (Read more about our methodology below.)

    Best long-term personal loans of 2024

    • Best for borrowing larger amounts: LightStream Personal Loans
    • Best for borrowing smaller amounts: Upgrade Personal Loans
    • Best for co-applicants: SoFi Personal Loans
    • Best for next-day funding: Discover Personal Loans
    • Best for borrowing from a credit union: First Tech Credit Union Personal Loan
    • Best for secured loan option: Best Egg Personal Loans

    Best for borrowing larger amounts

    LightStream Personal Loans

    • Annual Percentage Rate (APR)

      7.99%—25.99%* APR with AutoPay

    • Loan purpose

      Debt consolidation, home improvement, auto financing, medical expenses, and others

    • Loan amounts

    • Terms

      24 to 144 months* dependent on loan purpose

    • Credit needed

    • Origination fee

    • Early payoff penalty

    • Late fee

    Terms apply. *AutoPay discount is only available prior to loan funding. Rates without AutoPay are 0.50% points higher. Excellent credit required for lowest rate. Rates vary by loan purpose.

    Pros

    • Same-day funding available through ACH or wire transfer (conditions apply)
    • Loan amounts up to $100,000
    • No origination fees, no early payoff fees, no late fees
    • LightStream plants a tree for every loan

    Cons

    • Requires several years of credit history
    • No option to pay your creditors directly
    • Not available for student loans or business loans
    • No option for pre-approval on website (but pre-qualification is available on some third-party lending platforms)

    Who’s this for? LightStream is an online lender that offers for nearly every purpose except for higher education and small business. It allows eligible borrowers to apply for as little as $5,000 and as much as $100,000 in funding. This is one of the largest personal loans you can get.

    Standout benefits: LightStream offers loans with terms as long as 144 months (12 years), which is longer than any other lender we reviewed. It also offers a Rate Beat Program in which it will beat any competing lender’s unsecured loan by .10 percentage points. Loans can be approved and funded as soon as the same business day if you complete the application process by 2:30 p.m. ET. If you can’t make this deadline, you should be able to receive your funds the next business day.

    Best for borrowing smaller amounts

    Upgrade Personal Loans

    • Annual Percentage Rate (APR)

    • Loan purpose

      Debt consolidation/refinancing, home improvement, major purchase

    • Loan amounts

    • Terms

    • Credit needed

    • Origination fee

      1.85% to 9.99%, deducted from loan proceeds

    • Early payoff penalty

    • Late fee

      Up to $10 (with 15-day grace period)

    Pros

    • No early payoff fees
    • Loans up to $50,000
    • Fixed interest rates (no surprises)
    • Can pay creditors directly (may take up to two weeks)
    • Fast funding in as little as four days

    Cons

    • Origination fee of up to 8% (deducted from your loan)
    • Not available in Washington D.C.

    Why Upgrade is the best for financial literacy:

    • Free credit score simulator to help you visualize how different scenarios and actions may impact your credit
    • Charts that track your trends and credit health over time, helping you understand how certain financial choices affect your credit score
    • Ability to sign up for free credit monitoring and weekly VantageScore updates

    Who’s this for? Upgrade is a fintech company that aims to provide affordable financial products. It stands out for considering borrowers with fair credit. It offers personal loan amounts starting at $1,000, which makes it appealing to those who only need to borrow a smaller amount. Eligible borrowers have up to 84 months (seven years) to repay their loan balance in full. Its personal loans have an origination fee ranging from 1.85% to 9.99% that is deducted directly from your loan proceeds so be sure to account for this when deciding on the loan amount.

    Standout benefits: This lender lets you check what rate you may qualify for based on self-reported information, such as your desired loan amount and personal information, without impacting your credit score. It also accepts joint applications, which can be useful if your credit needs work. Funds are available as soon as one business day after accepting a loan offer and there are no prepayment penalties for paying a loan off early.

    Best for co-applicants

    SoFi Personal Loans

    • Annual Percentage Rate (APR)

      8.99% – 29.99% when you sign up for autopay

    • Loan purpose

      Debt consolidation/refinancing, home improvement, relocation assistance or medical expenses

    • Loan amounts

    • Terms

    • Credit needed

    • Origination fee

    • Early payoff penalty

    • Late fee

    Pros

    • No origination fees required, no early payoff fees, no late fees
    • Unemployment protection if you lose your job
    • DACA recipients can apply with a creditworthy co-borrower who is a U.S. citizen/permanent resident by calling 877-936-2269
    • Can have more than one SoFi loan at a time (state-permitting) 
    • May accept offer of employment (to start within the next 90 days) as proof of income
    • Co-applicants may apply

    Cons

    • Applicants who are U.S. visa holders must have more than two years remaining on visa to be eligible
    • No co-signers allowed (co-applicants only)

    Who’s this for? SoFi allows eligible borrowers to repay their loans over up to 84 months (seven years) and allows potential borrowers to have a co-applicant. A co-applicant is someone who applies for the loan with you and is equally responsible for paying back the full loan amount.

    In many cases, having a co-applicant can be advantageous since a co-applicant with a higher credit score can help you get approved for a lower interest rate and other more beneficial terms. The idea is that you may be seen as a less risky borrower since two individuals, each with a source of income, are signing on to repay the entire loan.

    Standout benefits: SoFi allows eligible borrowers to apply for as much as $100,000, making it another solid contender for those who need to borrow larger amounts of money. Loan applicants can choose between variable and fixed APR, which isn’t always an option most lenders only offer fixed-rate personal loans. It also allows applicants to check their rate before applying without impacting their credit score. SoFi members also enjoy various perks like rate discounts on other SoFi loans and complimentary access to financial planners.

    Best for next-day funding

    Discover Personal Loans

    • Annual Percentage Rate (APR)

    • Loan purpose

      Debt consolidation, home improvement, wedding or vacation

    • Loan amounts

    • Terms

      36, 48, 60, 72 and 84 months

    • Credit needed

    • Origination fee

    • Early payoff penalty

    • Late fee

    Pros

    • No origination fees, no early payoff fees
    • Same-day decision (in most cases)
    • Option to pay creditors directly
    • 7 different payment options from mailing a check to pay by phone or app

    Cons

    • Late fee of $39
    • No autopay discount
    • No cosigners or joint applications

    Who’s this for? Discover Personal Loans provides borrowers funding as soon as the next business day as long as their application is error-free and the loan is funded on a weekday. This option is handy if you require funding in a pinch. However, its maximum loan amount of $40,000 is on the lower end compared to some other lenders on this list.

    Standout benefit: Discover allows applicants to check their rate online before applying without impacting their credit score. Shopping around with a few lenders can help increase your odds of landing terms that work best for you.

    Best for borrowing from a credit union

    First Tech Federal Credit Union

    • Annual Percentage Rate (APR)

    • Loan purpose

      Debt consolidation, home improvement, medical bills or emergencies

    • Loan amounts

    • Terms

    • Credit needed

    • Origination fee

    • Early payoff penalty

    • Late fee

    Pros

    • Loans as low as $500 and as high as $50,000
    • No origination fees, application fees or prepayment penalties
    • Quick application
    • Ability to defer payments for up to the first 45 days
    • Offers a mobile app

    Cons

    • Must be a First Tech member to apply; you may also be eligible if someone in your family is already a member, you or a family member work for one of their partners, you live in Lane County, Oregon or you belong to the Computer History Museum or the Financial Fitness Association

    Who’s this for? First Tech Credit Union is ideal for those who prefer to bank with a credit union to potentially get lower rates and better terms. The credit union offers loan terms as long as 84 months.

    You must be a First Tech member to apply for this loan, but there are many ways to join. You can qualify if someone in your family is already a member, you or a family member work for a partner company, you live in Lane County, Oregon or you belong to the Computer History Museum or the Financial Fitness Association.

    Standout benefits: You can check your two-year loan rate before applying without impacting your credit score. Borrowers have the option to defer their first loan payment for up to 45 days after their funding date, which can be useful for those who need quick funding and a little more time to start repayments. Just keep in mind that deferring your first payment doesn’t defer the interest charges so you may end up paying more interest over the life of the loan.

    Best for secured loan option

    Best Egg Personal Loan

    • Annual Percentage Rate (APR)

    • Loan purpose

      Debt consolidation, home improvement, moving expenses, major purchases, adoption and more

    • Loan amounts

    • Terms

    • Credit needed

    • Origination fee

      0.99% to 8.99% of the loan amount

    • Early payoff penalty

    • Late fee

      $15 fee if the borrower’s bank account has insufficient funds

    Pros

    • Possible to secure financing in as little as 24 hours
    • An average APR discount of 20% compared to their unsecured loan*
    • Factors besides credit scores are considered when applying
    • Access to Best Egg Financial Health

    Cons

    • 0.99% to 8.99% origination fee
    • Home may be difficult to sell or refinance before the secured loan is repaid

    *The Best Egg Secured Loan is a personal loan secured using a lien against fixtures permanently attached to your home such as built-in cabinets, light fixtures, and bathroom vanities. Rest assured, your home itself will not be used as collateral.

    Who’s this for? Most personal loans are unsecured and many lenders don’t offer the ability to secure them with collateral. However, Best Egg offers the option to secure a personal loan using permanent fixtures in your home as collateral. Permanent fixtures can include built-in cabinets, light fixtures, shelving and more. With this option, borrowers do not need to put up personal possessions or the home itself as collateral, according to the lender’s website.

    Standout benefits: Best Egg allows for repeat borrowers, however, when applying for a second loan your total outstanding loan balance cannot exceed $100,000. Borrowers are charged an origination fee of 0.99% to 8.99% which is deducted from the loan proceeds. To be considered for a term of up to 84 months, you must apply for the secured loan option. Otherwise, the maximum loan term is 60 months.

    Common personal loan definitions you should know

    Here are some common personal loan terms you need to know before applying.

    • Co-applicants or joint applications: A co-applicant is a broad term for another person who helps you qualify by attaching their name (and financial details) to your application. A co-applicant can be a co-signer or a co-borrower. Having a co-applicant can be helpful when your credit score isn’t so great, or if you’re a young borrower with little credit history. If your co-applicant has a good credit score, you might be offered better terms, including qualifying for a lower APR and/or a bigger loan. At the same time, both applicants’ credit scores will be affected if you don’t pay back your loan, so be sure that your co-applicant is someone you feel comfortable sharing financial responsibility with. 
    • Co-signers: A co-signer agrees to help you qualify for the loan, but they are only responsible for making payments if you are unable to. The co-signer does not receive the loan, nor do they necessarily make decisions about how it is used. However, the co-signers credit will be negatively affected if the main borrower misses payments or defaults.
    • Co-borrower: Unlike a co-signer, a co-borrower is responsible for paying back the loan and deciding how it is used. Co-borrowers are usually involved in decisions about how the loan is used. Some lenders will only consider two co-borrowers who share a home or business address, as this is a firm indicator that they are sharing the responsibility of money in mutually beneficial ways. Both co-borrowers’ credit scores are on the hook if either one stops making payments or defaults.
    • Direct payments: Some lenders offer direct payments when you select debt consolidation as the reason for taking out a personal loan. With direct payments, the lender pays your creditors directly, and then deposits any leftover funds into your checking or savings account. Until you see your account balance is fully paid off, it’s best to keep making payments so that you don’t get hit with additional late fees and interest charges.
    • Early payoff penalty: Before you accept a loan, look to see if the lender charges an early payoff or prepayment penalty. Because lenders expect to get paid interest for the full term of your loan, they could charge you a fee if you make extra payments to pay your debt down quicker. The fees could equal either the remaining interest you would have owed, a percentage of your payoff balance or a flat rate.
    • Origination fee: An origination fee is a one-time upfront charge that your lender subtracts from your loan to pay for administration and processing costs. It is usually between 1% and 5%, but sometimes it is charged as a flat-rate fee. For example, if you took out a loan for $20,000 and there was a 5% origination fee, you would only receive $19,000 when you got your funds. Your lender would get $1,000 of the loan off the top, and you’d still have to pay back the full $20,000 plus interest. It’s best to avoid origination fees if possible. Having a good to excellent credit score helps you qualify for loans that don’t have origination or administration fees. 
    • Unsecured versus secured loans: Most personal loans are unsecured, meaning they are not tied to collateral. However, if your credit score is less-than-stellar and you’re finding it hard to qualify for the best loans, you can sometimes use a car, house or other assets to act as collateral in case you default on your payments. When you put an asset up as collateral, you are giving your lender permission to repossess it if you don’t pay back your debts on time and in full.

    FAQs

    What is a long-term personal loan?

    A long-term personal loan is a personal loan that offers a longer amount of time to repay the balance. Many personal loan lenders give borrowers up to 60 months (five years) to repay their loan, but some offer longer terms (six years or more).

    Keep in mind that because personal loans are a form of installment credit, borrowers must repay the balance in fixed, equal monthly amounts for a specified period.

    How big of a personal loan can I get?

    Personal loans can range in size from $500 to $100,000. Before you apply, consider how much you can afford to make as a monthly payment. Also, keep in mind that your creditworthiness may also determine the size loan you qualify for.

    How does a personal loan impact my credit score?

    As with any other form of credit, personal loans can impact your credit score positively or negatively. When you apply for a personal loan, a lender launches a hard inquiry on your credit report, which can result in a slight credit score dip at first. However, getting a personal loan can contribute to diversifying your credit mix, which may improve your credit score. Making on-time loan payments consistently can also improve your credit score over time.

    How is my personal loan rate decided?

    As with any other form of credit, your interest rate for your personal loan is decided based on factors such as your credit score, credit history, income, the loan’s size and term. Keep in mind that when taking on a personal loan with a longer repayment term, you may be subject to higher interest rates.

    What credit score is needed for a personal loan?

    A credit score in the good to excellent range (a FICO score of 670 or higher) is generally needed for a personal loan but some lenders consider fair or poor credit scores as well. Just keep in mind that the lower your credit score, the higher your interest rate may be.

    Why trust CNBC Select?

    At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every personal loan review is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of loan products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics. See our methodology for more information on how we choose the best long-term personal loans.

    Our methodology

    To determine which long-term personal loans are the best, CNBC Select analyzed dozens of U.S. personal loans offered by both online and brick-and-mortar banks, including large credit unions, that come with no origination or signup fees, fixed-rate APRs and flexible loan amounts and terms to suit an array of financing needs.

    When narrowing down and ranking the best personal loans, we focused on the following features:

    • No origination or signup fee: None of the lenders on our best-of list charge borrowers an upfront fee for processing your loan.
    • Fixed-rate APR: Variable rates can go up and down over the lifetime of your loan. With a fixed rate APR, you lock in an interest rate for the duration of the loan’s term, which means your monthly payment won’t vary, making your budget easier to plan.
    • Flexible minimum and maximum loan amounts/terms: Each lender provides a variety of financing options that you can customize based on your monthly budget and how long you need to pay back your loan.
    • No early payoff penalties: The lenders on our list do not charge borrowers for paying off loans early.
    • Streamlined application process: We considered whether lenders offered same-day approval decisions and a fast online application process. 
    • Customer support: Every loan on our list provides customer service available via telephone, email or secure online messaging. We also opted for lenders with an online resource hub or advice center to help you educate yourself about the personal loan process and your finances.
    • Fund disbursement: The loans on our list deliver funds promptly through either electronic wire transfer to your checking account or in the form of a paper check. Some lenders (which we noted) offer the ability to pay your creditors directly.
    • Autopay discounts: We noted the lenders that reward you for enrolling in autopay by lowering your APR by 0.25% to 0.5%.
    • Creditor payment limits and loan sizes: The above lenders provide loans in an array of sizes, from $500 to $100,000. Each lender advertises its respective payment limits and loan sizes, and completing a preapproval process can give you an idea of what your interest rate and monthly payment would be for such an amount.

    After reviewing the above features, we sorted our recommendations by best for overall financing needs, borrowing larger amounts, no fees, low credit scores and next-day funding.

    Note that the rates and fee structures advertised for personal loans are subject to fluctuate in accordance with the Fed rate. However, once you accept your loan agreement, a fixed-rate APR will guarantee interest rate and monthly payment will remain consistent throughout the entire term of the loan. Your APR, monthly payment and loan amount depend on your credit history and creditworthiness. To take out a loan, lenders will conduct a hard credit inquiry and request a full application, which could require proof of income, identity verification, proof of address and more. 

    Catch up on CNBC Select’s in-depth coverage of credit cards, banking and money, and follow us on TikTok, Facebook, Instagram and Twitter to stay up to date

    Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

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  • Discover: AI accelerates RPA | Bank Automation News

    Discover: AI accelerates RPA | Bank Automation News

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    Discover Financial Services is looking to AI to help boost its coding and robotic process automation efforts.   When implementing robotic process automation (RPA), “you don’t just say, all right we have automation, we’re done. … Because there are always opportunities to improve,” David Lyons, intelligent automation program manager at Discover Financial Services, said March 18 […]

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  • Capital One seeks community plan on Discover deal, even as some activists balk

    Capital One seeks community plan on Discover deal, even as some activists balk

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    Capital One’s deal to purchase Discover has drawn opposition from the National Community Reinvestment Coalition, which has more than 700 member organizations.

    Angus Mordant/Bloomberg

    Capital One Financial says it’s talking to community groups about developing a community benefits plan that would accompany its pending $35 billion acquisition of Discover Financial Services.

    Capital One is “proactively meeting” with organizations to gather feedback that would help with the creation of such a plan, the McLean, Virginia, company disclosed in a merger application submitted last week to the Federal Reserve.

    Capital One did not disclose the names of specific community groups with which it is engaging. But the bank said in its merger application that its 27-member Community Advisory Council has helped it to better understand the financial needs of underserved consumers.

    Current members of the company’s Community Advisory Council include the National Coalition of Asian Pacific American Community Development, the National Association of Latino Community Asset Builders and the Local Initiatives Support Corporation.

    One group that is not active in discussions with Capital One is the National Community Reinvestment Coalition, a fair-lending advocacy group that has negotiated 21 community benefits plans with banks since 2016, according to its website.

    The NCRC, which has more than 700 member organizations, opposes Capital One’s pending acquisition of Discover, arguing that much of Capital One’s business model takes advantage of lower-income credit card holders, and that the deal would diminish competition.

    A source familiar with Capital One’s thinking said that the company is not closing doors on the involvement of any community groups. This source also said that Capital One plans to move quickly to develop a community benefits plan after the public comment period on the proposed merger ends.

    Community benefits plans have become commonplace in connection with acquisitions as banks seek to outline to regulators how their deals will satisfy Community Reinvestment Act requirements.

    Such agreements often include pledges to expand banking services in low- and moderate-income areas. The commitments typically fall in three buckets — community development lending and investments; affordable housing and residential mortgage lending; and philanthropic dollars.

    In connection with Capital One’s 2011 acquisition of ING Direct USA, the bank agreed to a plan that included a community lending pledge of $180 billion over 10 years. Despite this pledge, the Capital One-ING Direct transaction still ran into opposition from consumer groups, and the regulators’ review process took longer than expected, but the deal was ultimately approved.

    On Monday, NCRC President and CEO President Jesse Van Tol said in an email that Capital One’s pledge related to the ING Direct acquisition was “largely a commitment to do the same level of subprime credit card and auto lending as they were already doing.” He said one part of the commitment — related to mortgages — wasn’t fulfilled because Capital One exited the residential mortgage business.

    “We don’t need to speculate about what a Capital One community benefits agreement would look like,” Van Tol said in the email. “Nobody should believe a Capital One-developed commitment.”

    Andy Navarette, Capital One’s head of external affairs, said in a written statement that the company has a “proud history of serving the full spectrum of American consumers and of outstanding Community Reinvestment Act performance.

    “Through the creation of our Community Advisory Council in 2013, as well as our deep relationships with over 1,000 non-profit partners, we work every day to develop innovative ways to best serve our communities and customers, including being the first large bank to completely eliminate overdraft fees in 2021,” Navarette said.

    “As noted in our application, we are in the process of seeking input as we develop our community benefit plan, and we welcome the opportunity to work with any individual or organization that shares our commitment to investment in communities,” he added.

    In its merger application, Capital One noted that it received an “outstanding” rating on its most recent Community Reinvestment Act performance evaluation in 2020 — the second consecutive evaluation where it got the highest possible rating.

    Discover’s banking unit received “outstanding” ratings in its 2016, 2018 and 2020 performance evaluations before more recently being downgraded to “satisfactory” because of ongoing deficiencies in its student loan servicing business, Capital One said in its merger application.

    Critics of community benefits plans point out that the agreements aren’t codified, and thus banks don’t have a legal obligation to fulfill the financial commitments they lay out. There have recently been renewed calls to hold banks accountable for what they promise.

    Last week, the Federal Deposit Insurance Corp. issued a policy statement on bank merger transactions that called for a change in the way regulators would assess a merger’s impact on communities. The Capital One-Discover deal needs to be approved by the Fed and the Office of the Comptroller of the Currency, but not the FDIC.

    The FDIC’s policy statement aims to force banks to show not only their past performance, but also how communities will be better off after an acquisition, according to Rohit Chopra, who is a member of the FDIC’s board of directors as well as director of the Consumer Financial Protection Bureau.

    The FDIC statement would mean that regulators stop “outsourcing their legal requirement to community organizations,” and it would give those organizations “more confidence that the commitments made have some real teeth to them” and are “not just utter fakery,” Chopra said at an event in Washington last week.

    Chopra also alluded to confusion about what would happen to Silicon Valley Bank’s $11.2 billion community benefits plan after the bank failed in March 2023. The agreement was put together in conjunction with Silicon Valley Bank’s purchase of Boston Private Financial Holdings in 2021.

    “We saw a number of community organizations ask some real big questions after the failure of Silicon Valley Bank,” Chopra said.

    In November, First Citizens BancShares, which acquired parts of Silicon Valley Bank after its collapse, updated the community benefits plan. It agreed to invest more than $6.5 billion in California and Massachusetts communities that were set to benefit from Silicon Valley Bank’s plan.

    Discussions about the FDIC’s policy statement might help “to figure out how we can make some of this merger review actually lead to improvements rather than what I see as a hollowing out of a lot of services to a lot of low- to moderate-income people,” Chopra said.

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  • Jamie Dimon on Capital One’s $35.3 billion Discover acquisition: ‘Let them compete’

    Jamie Dimon on Capital One’s $35.3 billion Discover acquisition: ‘Let them compete’

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    Jamie Dimon, President & CEO,Chairman & CEO JPMorgan Chase, speaking on CNBC’s Squawk Box at the World Economic Forum Annual Meeting in Davos, Switzerland on Jan. 17th, 2024.

    Adam Galici | CNBC

    JPMorgan Chase CEO Jamie Dimon isn’t worried about the added competition from a bulked-up Capital One if its $35.3 billion takeover of Discover Financial gets approved.

    “My view is, let them compete,” Dimon said. “Let them try, and if we think it’s unfair we’ll complain about that.”

    Dimon, speaking to CNBC’s Leslie Picker from a Miami conference, acknowledged that if regulators approve the Capital One-Discover deal, his bank will be eclipsed as the nation’s biggest credit-card lender. But that didn’t stop him from praising Capital One’s CEO Richard Fairbank.

    “I’m not worried about it really, but we do track everything he does,” Dimon added.

    The deal has two major components: the credit card business and the payment network, Dimon noted.

    “The credit card business… they’ll be bigger and [have] more scale,” Dimon said. “They’re very good at it. I have enormous respect for Richard Fairbanks and Capital One.”

    It’s unclear if Capital One can create a true alternative to the dominant card networks in Visa and Mastercard with this deal, Dimon said.

    He added that Capital One will have an “unfair advantage versus us” in debit payments, owing to the fact that legislation known as the Durbin Amendment caps debit fees for large banks, but not Discover or American Express.

    “Of course, I have a problem with that,” Dimon said. “You know, like why should they be allowed to price debit different than we price debit just because of a law that was passed?”

    This story is developing. Please check back for updates.

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  • FIS leader talks M&A, tech integration | Bank Automation News

    FIS leader talks M&A, tech integration | Bank Automation News

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    Institutions approaching mergers and acquisitions must consider how to combine cultures, business models in addition to their tech stacks.  Tech stack integration doesn’t have to be the most challenging aspect of a merger or acquisition, especially if the institutions are already using the same core provider, Tom Ruppel, vice president and business strategy manager at […]

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    Whitney McDonald

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  • Capital One’s acquisition has $1.4 billion breakup fee if rival bid emerges, but none if regulators kill deal

    Capital One’s acquisition has $1.4 billion breakup fee if rival bid emerges, but none if regulators kill deal

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    Capital One headquarters in McLean, Virginia on February 20, 2024. 

    Brendan Smialowski | AFP | Getty Images

    Capital One‘s blockbuster takeover proposal for Discover Financial includes a $1.38 billion breakup fee if Discover decides to go with another buyer, but no such fee if U.S. regulators kill the deal, people with knowledge of the matter told CNBC.

    Capital One said late Monday it had an agreement to purchase rival credit card player Discover in an all-stock transaction valued at $35.3 billion.

    While Discover can’t actively solicit alternative offers, it can entertain proposals from other deep-pocketed bidders before shareholders vote on the transaction.

    In the unlikely event that Discover decides to go with another offer, it would owe Capital One $1.38 billion, which aligns with the typical breakup fee in bank deals of between 3% and 4% of the transaction’s value, said the people.

    Breakup fees are an industry practice designed to motivate both sides of an acquisition to close the transaction. They can result in massive payouts when deals sour, like the estimated $6 billion AT&T paid to T-Mobile after giving up its 2011 takeover effort because of opposition from the U.S. Department of Justice.

    Watchers of the Capital One agreement are taking particular interest in whether U.S. banking regulators will allow it to happen. Regulators have blocked deals across industries in recent years on antitrust grounds, and getting a transaction done during an election year in an environment considered hostile to bank mergers has been called uncertain.

    Neither side will owe the other a breakup fee if regulators block the acquisition, which is said to be typical for bank deals. Still, last year Canadian lender TD Bank agreed to pay $225 million to First Horizon after its takeover collapsed amid regulatory scrutiny of the larger firm.

    When asked about the “intense regulatory backdrop” for this deal during a conference call Tuesday, Capital One CEO Richard Fairbank said he believed he was “well-positioned for approval” and that the companies have kept their regulators informed.

    Capital One needs to get approvals from the Federal Reserve and the Office of the Comptroller of the Currency for the deal to go through. The Justice Department also has the right to comment on the acquisition, and can litigate to block the transaction.

    The deal happened after Capital One approached Discover, and didn’t include a wide search for all possible bidders, according to one of the people.

    — CNBC’s Alex Sherman contributed reporting

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  • Here’s why Capital One is buying Discover in the biggest proposed merger of 2024

    Here’s why Capital One is buying Discover in the biggest proposed merger of 2024

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    Capital One CEO and Chairman, Richard Fairbank.

    Marvin Joseph| The Washington Post | Getty Images

    Capital One’s recently announced $35.3 billion acquisition of Discover Financial isn’t just about getting bigger — gaining “scale” in Wall Street-speak — it’s a bid to protect itself against a rising tide of fintech and regulatory threats.

    It’s a chess move by one of the savviest long-term thinkers in American finance, Capital One CEO Richard Fairbank. As a co-founder of a top 10 U.S. bank by assets, his tenure is a rarity in a banking world dominated by institutions like JPMorgan Chase that trace their origins to shortly after the signing of the Declaration of Independence.

    Fairbank, who became a billionaire by building Capital One into a credit card giant since its 1994 IPO, is betting that buying rival card company Discover will better position the company for global payments’ murky future. The industry is a dynamic web where players of all stripes — from traditional banks to fintech players and tech giants — are all seeking to stake out a corner in a market worth trillions of dollars by eating into incumbents’ share amid the rapid growth of e-commerce and digital payments.

    “This deal gives the company a stronger hand to battle other banks, fintechs and big tech companies,” said Sanjay Sakhrani, the veteran KBW retail finance analyst. “The more that they can separate themselves from the pack, the more they can future-proof themselves.”

    The deal, if approved, enables Capital One to leapfrog JPMorgan as the biggest credit card company by loans, and solidifies its position as the third largest by purchase volume. It also adds heft to Capital One’s banking operations with $109 billion in total deposits from Discover’s digital bank and helps the combined entity shave $1.5 billion in expenses by 2027.

    ‘Holy Grail’

    But it’s Discover’s payments network — the “rails” that shuffle digital dollars between consumers and merchants, collecting tolls along the way — that Fairbank repeatedly praised Tuesday when analysts queried him on the strategic merits of the deal. There are only four major card networks: giants Visa and Mastercard, then American Express and finally the smallest of the group, Discover.

    Capital One and Discover credit cards arranged in Germantown, New York, US, on Tuesday, Feb. 20, 2024. 

    Angus Mordant | Bloomberg | Getty Images

    “That network is a very, very rare asset,” Fairbank said. “We have always had a belief that the Holy Grail is to be able to be an issuer with one’s own network so that one can deal directly with merchants.”

    From the time of Capital One’s founding in the late 1980s, Fairbank said, he envisioned creating a global digital payments tech company by owning the payment rails and dealing directly with merchants. In the decades since, Capital One has been ahead of stodgier banks, gaining a reputation in tech circles for being forward-thinking and for its early adoption of cloud computing and agile software development.

    But its growth has relied on Visa and Mastercard, which accounted for the vast majority of payment volumes last year, processing nearly $10 trillion in the U.S. between them.

    Capital One intends to boost the Discover network, which carried $550 billion in transactions last year, by quickly switching all of its debit volume there, as well as a growing share of its credit card flows over time.

    By 2027, the bank expects to add at least $175 billion in payments and 25 million of its cardholders onto the Discover network.

    Owning the toll road

    The true potential of the Discover deal, though, is what it allows Capital One to do in the future if it owns the toll road, according to analysts.

    By creating an end-to-end ecosystem that is more of a closed loop between shoppers and merchants, it could fend off competition from rapidly mutating fintech players like Block and PayPal, as well as buy now, pay later firms like Affirm and Klarna, who have made inroads with both businesses and consumers.

    Capital One aims to deepen relationships with merchants by showing them how to boost sales, helping them prevent fraud and providing data insights, Fairbank said Tuesday, all of which makes them harder to dislodge. It can use some of the network fees to create new loyalty plans, like debit rewards programs, or underwrite merchant incentives or experiences, according to analysts.

    “Owning a network allows us to deal more directly with merchants rather than a network intermediary,” Fairbank told analysts. “We create more value for merchants, small businesses and consumers and capture the additional economics from vertical integration.”

    It’s a capability that technology or fintech companies probably covet. The Discover network alone would be worth up to $6 billion if sold to Alphabet, Apple or Fiserv, Sakhrani wrote Tuesday in a research note.

    Will regulators approve?

    The Capital One-Discover combination could fortify the company against another potential threat — from Washington.

    Proposed legislation from Sen. Dick Durbin, D-Ill., aims to cap the fees charged by Visa and Mastercard, potentially blowing up the economics of credit card rewards programs. If that proposal becomes law, the competitive position of Discover’s network, which is exempt from the limitations, suddenly improves, according to Brian Graham, co-founder of advisory firm Klaros Group. That mirrors what an earlier law known as the Durbin amendment did for debit cards.

    Chairman Dick Durbin (D-IL) speaks during a US Senate Judiciary Committee hearing regarding Supreme Court ethics reform, on Capitol Hill in Washington, DC, on May 2, 2023.

    Mandel Ngan | AFP | Getty Images

    “There are a bunch of things aimed, in one way or another, at the card networks and that ecosystem,” Graham said. “Those pressures might be one of the things that creates an opportunity for Capital One in the future if they have control over this network.”

    The biggest question for Capital One, its customers and investors is whether the merger will ultimately be approved by regulators. While Fairbank said he expects the deal to be closed in late 2024 or early 2025, industry experts said it was impossible to know whether it will be blocked by regulators, like a string of high-profile takeovers among banks, airlines and tech companies.

    On Tuesday, Democratic Sen. Elizabeth Warren of Massachusetts urged regulators to swiftly block the deal, calling it “dangerous.” Sen. Sherrod Brown, D-Ohio, chairman of the Senate Banking Committee, said he would be watching the deal to “ensure that this merger doesn’t enrich shareholders and executives at the expense of consumers and small businesses.”

    The Discover deal’s survival may hinge on whether it’s seen as boosting an also-ran payments network, or allowing an already-dominant card lender to level up in size — another reason Fairbank may have played up the importance of the network.

    “Which thing you are more concerned about will define whether you think this is a good deal or a bad deal from a public policy point of view,” Graham said.

    Don’t miss these stories from CNBC PRO:

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  • The Capital One-Discover deal raises thorny issues for Washington

    The Capital One-Discover deal raises thorny issues for Washington

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    Under Attorney General Merrick Garland, the Department of Justice has signaled that it will take a tougher approach to bank mergers. But the department’s leadership could change in early 2025, at which point the Capital One-Discover deal might still be under review.

    Bloomberg

    WASHINGTON — Capital One Financial’s proposed acquisition of Discover Financial Services will spark an epic test of Washington policymakers who are increasingly skeptical of concentration in the financial industry. 

    Competition — or the lack thereof — will be at the heart of the debate as bank regulators and antitrust officials weigh whether to approve the deal.

    Does Capital One’s purchase of Discover create an unstoppable credit card-issuing giant? Does it help consumers by giving Discover’s payments network a fighting chance against massive rivals Visa and Mastercard? Or does it do both? And if so, what should be the verdict?

    “The question is: Is this anti-competitive or is it pro-competitive?” said Todd Baker, a professor at Columbia Law School and managing principal at Broadmoor Consulting.

    The Biden administration, which has pledged aggressive scrutiny of mergers in the banking and financial sectors, would ideally like not to be approving more big-bank mergers, Baker said. “But this might actually be one which is relatively pro-competitive,” he added.

    Monday’s announcement of the proposed $35.3 billion merger immediately drew criticism from Democratic lawmakers.

    Sen. Elizabeth Warren, D-Mass., said that the deal “threatens our financial stability, reduces competition, and would increase fees and credit costs for American families.” 

    “Regulators must block it immediately,” Warren said on X, formerly known as Twitter.

    Consumer groups, including the National Community Reinvestment Coalition and Americans for Financial Reform, also came out against the deal, which would combine two of the top six U.S. credit card lenders.

    “Today’s concentrated markets and behemoth banking organizations are the result of a thirty-year run of mergers and consolidation,” said Patrick Woodall, senior fellow at the Americans for Financial Reform Education Fund. “It is time for the banking regulators to stop rubber-stamping these transactions and stand up for consumers, communities, and a more stable financial system by blocking this takeover.”

    The deal’s approval is not a slam dunk, experts said, nor is its rejection. But they also said there are reasons to think that the Biden administration, notwithstanding its general skepticism of large mergers, might approve this particular deal.

    Even if Capital One were to suddenly account for 19% of U.S. credit card loans — as some analysts calculated would be the case if the merger goes through — it would still face strong rivals such as JPMorgan Chase, Citigroup, Bank of America, Wells Fargo and American Express.

    But the clearer argument for approval is that, thanks to Capital One’s larger balance sheet and customer base, Discover’s payments network would get the lift it needs to better compete with Visa and Mastercard, which are often described as a “duopoly.”

    “Will this introduce more competition into cards or reduce competition in banking?” asked Peter Conti-Brown, a professor at the University of Pennsylvania’s Wharton School. “These are the questions on which the preliminary announcements are light, but that regulatory processes will be focused like lasers.” 

    Within the Biden administration, bank regulators and the Department of Justice don’t see the risks in a uniform way, Conti-Brown said. Some officials see any concentration as something to fight, while others see bank concentration as serving useful purposes, he said.

    During a Tuesday morning conference call, Capital One CEO Richard Fairbank was optimistic about the deal’s chances for regulatory approval. He said he expects the deal to close in late 2024 or early 2025. 

    The timeline could be crucial. Brian Gardner, chief Washington policy strategist for Stifel, noted that, should Republicans take the presidency after the 2024 election, many of the existing dynamics involving Democratic agency heads could be moot. 

    “At that point, things have shifted in favor of the industry,” he said. 

    Fairbank hinted that concerns about the power of Visa and Mastercard could work in Capital One’s favor, saying that the deal would “position us to compete more effectively against some of the largest banks and payment companies in the United States.” 

    “We believe that we are well positioned for approval,” he said. 

    The dominance of Visa and Mastercard in card processing has been the target of recent legislation that aims to reduce credit card swipe fees. That bipartisan bill would require larger banks to offer merchants the choice of two unaffiliated card networks that aren’t both Visa and Mastercard.

    The legislation has picked up momentum with additional co-sponsors and a potential hearing with the heads of the card networks. 

    Shahid Naeem, a senior policy analyst at the American Economic Liberties Project, a left-leaning group that criticizes corporate consolidation, argued that regulators should not take Capital One’s pro-competition arguments at face value. He said it will be tough for Discover to “become a threat” to Visa and Mastercard.

    Some Capital One customers may not want to ditch their current Visa and Mastercard cards and switch to the Discover network, Naeem noted.

    “It’s a tall task,” Naeem said. “When these arguments are being made about, ‘This is how this deal is going to improve competition,’ it’s important to just ask the next question … ‘OK, why?’ ‘OK, how?’ ‘What’s the time frame?’”

    Jeremy Kress, a University of Michigan professor who was recently detailed at the Department of Justice to work on bank merger policy, said that he sees “red flags” in terms of the deal’s competitive effects on the credit card market, given that Capital One and Discover are already among the top issuers.

    “Antitrust law is not a balancing act,” he said. 

    The recent rejection of the JetBlue-Spirit Airlines merger by a judge is a good example of why the Capital One-Discover deal should fail, Kress said.

    JetBlue had argued that allowing the two airlines to merge would help the buyer to compete better with larger, legacy airlines. But the Department of Justice contended — and the judge agreed — that it’s not enough for a deal to help competition in one customer segment. If another segment will be hurt, the deal should be rejected.

    “You could see a similar line of reasoning applying here, even if for the sake of argument, you assume competitive efficiency in the card network business,” Kress said. “If it would be anti-competitive for the card issuance market, then the deal is anti-competitive.” 

    Last summer, the Department of Justice signaled that it would start taking a tougher approach to bank mergers. Jonathan Kanter, the department’s top antitrust cop, said in a speech that the DOJ would expand the number of considerations in its bank merger review process.

    Bank regulators have also been rethinking how they approach merger applications.

    Late last month, acting Comptroller of the Currency Michael Hsu said in a speech that the agency he leads would remove a rule that limits the amount of time it has to consider mergers — a change that could slow the approval of deals, but which some advocacy groups still found to be anemic.  

    For the proposed Capital One-Discover merger, the bank regulators’ review process will not follow its typical path.

    Such reviews typically involve careful consideration of a deal’s impact on bank branches in certain areas — often dealing with concerns about financial deserts — but Discover does not operate branches.

    Baker said the deal would create a dominant player in the subprime credit card market, and potentially also in the near-prime market. That’s a factor that might draw regulators’ focus, he said.

    “It really becomes a question, almost not of antitrust, but more around industrial policy,” Baker said. “What do we want the banking and payment system to look like in the future?”

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    Claire Williams

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  • Capital One to acquire Discover in $35.3B all-stock deal: Here’s what you need to know

    Capital One to acquire Discover in $35.3B all-stock deal: Here’s what you need to know

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    David George, Baird senior research analyst, joins ‘Squawk Box’ to discuss news of Capital One Financial acquiring Discover Financial Services in a $35.3 billion all-stock deal, what the deal means for consumers and the banking sector at large, and more.

    05:13

    Tue, Feb 20 20247:51 AM EST

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  • Capital One acquiring Discover Financial Services, report says

    Capital One acquiring Discover Financial Services, report says

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    Sopa Images | Lightrocket | Getty Images

    Capital One Financial is set to acquire Discover Financial Services, according to a report from The Wall Street Journal. The deal could be announced Tuesday, the outlet said, citing sources.

    It will be an all-stock deal and Capital One, which already uses Visa and Mastercard networks, plans to keep the Discover brand, the Wall Street Journal said.

    The news comes on the back of a Bloomberg News report on Monday that Capital One was considering an acquisition.

    CNBC has reached out for comment from both Capital One and Discover.

    The merger of the two companies, who are among the largest credit card issuers in the U.S., would expand Capital One’s credit-card offerings. The company bought digital concierge service Velocity Black, a premium credit card and luxury market platform, in June of last year.

    Shares of Discover are down 1.7% lower for the year, putting the company at a $27.63 billion market cap. Capital One has a market cap of $52.2 billion and shares of the company are up 4.6% in 2024.

    The Capital One-Discover merger would be one of the largest deals announced so far this year. Synopsys announced a deal to buy Ansys for $35 billion in January and Diamondback Energy‘s $26 billion deal to buy privately held oil and gas producer Endeavor Energy was announced on Feb. 12.

    Read the full story here: Capital One is buying Discover Financial, sources say

    This is breaking news. Please check back for updates.

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  • Discover to focus on integrated digital banking model in 2024 | Bank Automation News

    Discover to focus on integrated digital banking model in 2024 | Bank Automation News

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    Discover Financial Services invested in its integrated digital banking model, risk management, analytics and compliance initiatives in 2023 and expects to continue those efforts this year.  “We’ve dedicated a lot of dollars in terms of analytics, in terms of call frequency and best time to call, and we’ve worked on our call scripts to ensure […]

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    Whitney McDonald

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  • Discover appoints Rhodes as new CEO | Bank Automation News

    Discover appoints Rhodes as new CEO | Bank Automation News

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    Card payments network giant Discover Financial Services has named Michael Rhodes as chief executive and president. He is expected to take the helm of the company by March 6, according to a Discover release on Dec. 11.  Rhodes has led TD Bank’s Canadian personal banking segment since January 2022, also serving in other management positions […]

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    Vaidik Trivedi

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  • Here are Wednesday's biggest analyst calls: Tesla, Walmart, Qualcomm, Deere, Robinhood, Shopify & more

    Here are Wednesday's biggest analyst calls: Tesla, Walmart, Qualcomm, Deere, Robinhood, Shopify & more

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