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SUBJECT: Opposition to Capital One’s application to acquire ING Direct
Federal Reserve Bank of Richmond
Attn: Adam M. Drimer, Assistant Vice President
701 East Byrd Street
Richmond, VA 23261-4528
Re: Opposition to Capital One’s application to acquire ING Direct
Dear Mr. Drimer:
[Name of group/personal information] requests that Capital One Financial Corporation’s proposal to acquire ING Direct be denied. We have serious concerns about the impact of the deal on consumers, communities and the economy.
The following concerns justify this request:
Too-Big-to-Fail. Capital One’s proposed acquisition would make Capital One the fifth largest bank in the United States. Carefully examining this aspect of the deal represents the first true test of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) requirement that the Federal Reserve Board analyze systemic risk. Less than three years ago, the Department of Treasury deemed Capital One to be so intertwined in the American financial markets that the pending collapse of other financial institutions required a $3.55 billion injection of taxpayer dollars to buffer the bank’s balance sheet. Federal Reserve Board Governor Daniel Tarullo set this standard for the growth of firms like Capital One: “The regulatory structure for SIFIs [Systemically Important Financial Institutions] should discourage systemically consequential growth or mergers unless the benefits to society are clearly significant.” We have not seen a clear delineation of significant benefits. More products and more ATMs are not “clearly significant” benefits to society. Instead, they amount to little more than the natural consequences of merging any two previously distinct financial institutions. And, often after a merger, we have seen branches close.
Serious Concerns about Capital One’s Business Practices. We are concerned that recent changes to Capital One’s business policies have led to a pattern of discriminatory lending. For example, in 2010, Capital One implemented a policy that cut off Federal Housing Administration (FHA) loans to borrowers with credit scores between 580-620 even though FHA fully guarantees these loans. Capital One’s denial has a disparate impact by race in violation of our nation’s anti-discrimination laws. In fact, there are active lending discrimination complaints against Capital One. A review of CRA exams, Home Mortgage Disclosure Act data, and small business loan data demonstrate significant inconsistencies in the performance of the two banks in making services and branches available to low- and moderate-income communities.
Serious concerns about the potentially predatory nature of Capital One’s credit card lending practices. Attorneys General in Minnesota, West Virginia and California have each investigated Capital One for engaging false and misleading credit card marketing.
Capital One’s pattern of disinvestment from low- and moderate-income areas and communities of color. This lending pattern is demonstrated by their small business lending record. Capital One’s small business lending under the Small Business Administration 7(a) lending programs, a major source of business loans for minorities, women and veterans, has essentially evaporated over the past four years. In 2006, Capital One had roughly $22 billion in assets and did $228 million in 7(a) lending. By 2010, it had grown to over $96 billion in assets, but astonishingly made less than $600,000 in 7(a) loans. Small businesses are the backbone of our economy and they have been the principal catalyst for the economic recovery in the previous two recessions. Capitol One’s abandonment of a major small business lending market for women, minorities and veterans at such a crucial time does not warrant an expansion.
We respectfully urge the Federal Reserve Board to deny Capital One’s proposal to acquire ING Direct. We believe the deal would expand practices that are not beneficial to consumers, communities and the economy. Thank you for this opportunity to comment.
[Name of Organization]