In response to reports that Capital One has struck a deal with NeighborWorks and other advocacy organizations to facilitate its proposed acquisition of Discover, National Community Reinvestment Coalition (NCRC) President and CEO Jesse Van Tol released the following statement:
The large numbers in Capital One’s press release appear designed to dazzle, but these things rise and fall based on the details of implementation and accountability. I should know: I’ve helped NCRC negotiate a community benefits agreement as part of nearly every major bank merger of the past decade.
Unfortunately, it is impossible to put any stock in promises Capital One makes. They’ve pulled this stunt with banking regulators before, promising in 2012 to make $28.5 billion in home loans over ten years to low- and moderate-income borrowers then bailing on mortgage loans entirely five years later having made less than half that total. That’s why NCRC hasn’t negotiated with Capital One: We know them to be cynical, manipulative and dishonest.
By the time Capital One broke its promises, it was too late for the agencies to do anything about it. They’d already acquired ING Direct. This time can be different: The American public’s banking regulators can show they won’t be fooled a second time by a bank that’s built an empire around trapping lower-income families in revolving debts they’re unlikely to ever repay.
Capital One’s announcement today is reminiscent of their last plan, which also appeared to be a big number at the time. Capital One ran up the numbers by including credit-card lending, something no other community benefits plan includes. But credit card lending doesn’t build wealth, and Capital One is known for its problematic practices in that market.
The plan Capital One announced was formed through a deeply flawed process. By requiring the groups to sign an NDA prohibiting them from discussing the plan with community groups, Capital One ensured the process had no transparency or community accountability. We can’t truly tell what is in the plan. In contrast, most community benefits plans are reviewed with dozens or hundreds of community groups prior to announcement. Further, by dangling grants for non-profit groups to get on board with the merger, Capital One has made a mockery of the process.
I am also concerned with the propriety of government-backed NeighborWorks endorsing the plan, given that both the OCC and the Fed hold board seats at NeighborWorks. This creates the impression of a back-door endorsement of the merger and a serious conflict of interest just as OCC and Fed staffers review this merger application.
More detail on Capital One’s broken promises during the ING Direct merger can be found here.
NCRC’s comment letter opposing the Capital One-Discover merger can be found here.
A separate coalition letter by NCRC, Public Citizen, Americans for Financial Reform and the American Economic Liberties Project can be found here.
