Walmart's divorce from the credit card issuer Synchrony Financial is spilling into court as negotiations falter over whether to shift billions of dollars in balances to the retailer’s new partner, Capital One.
In a heavily redacted lawsuit filed Thursday in Arkansas federal court, Walmart asked for a jury trial and said it is seeking damages of at least $800 million. It accused the lender of breaching their agreement for credit cards issued to Walmart’s shoppers.
Synchrony broke an “implied promise” that it wouldn’t harm Walmart’s ability “to receive fruits of the contract,” the retailer said in the complaint. In a statement, Synchrony called the suit “baseless” and said it plans to file substantial claims against Walmart.
Walmart announced in July it that Capital One Financial would begin issuing its private-label and cobrand credit cards beginning next year after partnering with Synchrony on the portfolio for nearly 20 years. Synchrony has said it is negotiating whether to sell the $10 billion in balances on the Walmart portfolio to Capital One or retain it.
In its statement, Synchrony accused Walmart of walking away from the negotiations.
“This lawsuit is nothing more than an attempt by Walmart to exert leverage and avoid the contractually defined process for valuing the loan portfolio that Synchrony has serviced,” Synchrony said. It pledged to bring a claim that will “demonstrate Walmart failed in the most basic elements of our agreement, including its promotion of the card program both in stores and online.”
The shift to Capital One was a blow to Synchrony, as the partnership with Walmart accounted for more than 10% of the interest and fees the bank earned on its loans last year.
Synchrony has said it could instead keep the portfolio, converting qualifying customers to general-purpose credit cards that can be used anywhere. In a regulatory filing, it predicted that regardless of whether it sells or holds, its decision will be accretive to earnings relative to renewing the contract with Walmart.
