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Capital One pledges to keep Delaware jobs, donate millions, in Discover merger

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Capital One pledges to keep Delaware jobs, donate millions, in Discover merger

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Capital One is making some big promises these days.

In March, the financial giant announced that they would acquire credit card and online banking company Discover in a blockbuster $35 billion deal. Ever since then, Capital One has been on a campaign to convince both federal regulators and communities all over the country that the merger is good for the country, good for competition, and maybe even good for jobs.

Previous: Capital One is buying Discover in a blockbuster $35B deal. What’s this mean for Delaware?

If approved by federal regulators, the merger will be an especially big deal in the banking-heavy state of Delaware, where Discover and Capital One each employ more than a thousand people. Around 1 in every 220 Delaware workers is employed at either Discover or Capital One.

Delaware’s State Bank Commissioner will hold a public meeting to consider the Capital One deal at Dover’s Tatnall Building. Members of the public are allowed to attend.

When the deal was first announced, observers commented that it has the potential to change global banking, possibly putting Capital One on a footing to compete with the longstanding credit card duopoly of Visa and Mastercard. It would also likely place Capital One among the eight largest banks in America.

But if the deal’s effects on global banking might take a while to work out, Capital One has begun to give a much clearer picture about what the merger will portend for Delaware, and for the many Delaware employees of Discover. The company also released a $265 billion Community Benefits Plan designed to bolster community support for the merger.

Here’s what we know so far.

Will the Capital One deal lead to layoffs for Discover’s Delaware employees?

Not many if any, said Capital One’s Head of External Affairs, Andy Navarrete.

“We’re pledging not to lay off any of Discover’s front-line associates,” Navarrete said. This should account for nearly all, if not all of Discover’s workforce in Delaware, he said.

The 1,000 or so employees at Discover’s Iron Hill Corporate Center in Delaware work primarily in fraud, customer care and consumer banking. Discover’s main corporate headquarters is located in Illinois.

Capital One has also committed to keeping open Discover’s sole physical branch in Greenwood.

This branch “will convert to a Capital One physical branch following conversion of Discover deposit accounts to Capital One systems,” according to a plan released earlier this year by Capital One.

Capital One has pledged billions in community benefits, including $35 million to Delaware nonprofits

As part of the merger, Capital One presented a five-year, $265 billion document called a Community Benefits Plan — essentially a pot-sweetener for nonprofits, governments and community groups across the country that’s meant to bolster support for the deal.

In essence, said Navarrete, one of the things federal regulators look at in assessing deals is whether they have community support, and so the community benefits plan is designed to shore up that support.

Capital One arrived at the deal after consulting with national community groups that include the National Association for Latino Community Asset Builders (NALCAB), NeighborWorks America, the Opportunity Finance Network (OFN) and the Woodstock Institute.

The vast majority of the $265 billion will arrive in the form of $200 billion in lending to low-and moderate-income (LMI) consumers, or to people residing in lower-income communities. Another $44 billion will arrive in the form of community development financing, and $15 billion will be small-business lending, especially in distressed areas.

But some of the money, about $200 million, will be straight-up philanthropy. Delaware, as both an important banking center and an important home for both Discover and Capital One, would receive an outsized portion of this. Capital One has committed to giving $35 million to nonprofits in Delaware, should the deal go through.

As part of the agreement, Capital One has pledged to maintain Discover’s existing corporate giving commitments and relationships.

In particular, this means that if the deal is approved, Capital One will continue Discover’s existing partnership with the Delaware State Housing Authority (DSHA) in a program designed to offer down payment assistance and below-market interest rates for first-time home buyers with low-to-moderate income.

A number of Delaware leaders have written letters of support for the Capital One-Discover deal, including Wilmington Mayor Mike Purzycki and Delaware State University President Tony Allen.

Both Purzycki and Allen cited Capital One’s previous $4.7 million donation of a Wilmington Riverfront building that is now home to Delaware State’s “DSU Riverfront” campus.

After the benefits plan was published, the nonprofit Delaware Community Reinvestment  Action Council reversed its opposition to the Capital One-Discover deal, provided that the new company is legally bound to honor the terms of the deal.

“Should this merger be approved, we ask that it is conditioned on Capital One keeping its promises to Delaware,” wrote the Action Council’s executive director, Rashmi Rangan, in July.

Who has voiced opposition to the Capital One-Delaware deal?

Opponents to the deal have focused mostly on monopolistic effects of ever-larger mergers and institutions, particularly in the financial sector.

“Mergers create larger banks that can exercise market power to impose higher costs on consumers, reduce the volume or quality of banking services, or become so large that they pose a risk to the entire financial system and real economy,”  nonprofit advocacy group Americans for Financial Reform wrote in a regulatory filing in July.

In an interview with banking journalism site PaymentsDive, the AFR’s managing director Patrick Woodall said that a specific hazard would be that a merged Capital One/Discover would own 30% of the market in non-prime credit card scores, making it easier for the company to potentially charge higher rates to these customers by lowering choice.

Others said Capital One had not always made good on its commitments. At a federal reserve hearing in July, National Community Reinvestment Coalition CEO Jesse Van Tol testified before the Federal Reserve Board that Capital One had not made fully good on its promise of billions in low-income loans in a 2012 merger with ING Bank FSB.

Capital One has argued the Discover deal would improve competition, by allowing Discover’s network to compete with dominant duopoly Visa and Mastercard.

How can people attend Capital One’s public meeting, or view the company’s promises to Delaware?

The public meeting with Delaware’s State Bank Commissioner is Friday at 1 p.m. at Dover’s Tatnall Building at 150 S. Martin Luther King Jr Blvd., Room 112. Members of the public are allowed to attend in person, but no virtual meeting information has been offered.

The main points of Capital One’s proposed Community Benefits Agreement can be viewed at investor.capitalone.com/investor-relations.

Capital One also offers a new Delaware-specific page trumpeting its philanthropy and investments in the First State at capitalone.com/about/delaware.

Matthew Korfhage is business and development reporter in the Delaware region covering all things related to land and money: openings and closings, construction, and the many corporations that call the First State home. Send tips and insults to mkorfhage@gannett.com.

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