WASHINGTON — The Office of the Comptroller of the Currency has approved Capital One Financial Corp.'s acquisition of HSBC Bank USA's credit card portfolio.
In a letter to a Capital One attorney, the OCC said the deal would not significantly lower the number of competitors offering credit cards, nor would it result in a reduction in products or services to the general public.
The deal is projected to increase by 16% the assets held by Capital One's main bank subsidiary, Capital One N.A., to approximately $154 billion, making it the nation's 14th largest bank in total assets. It would boost by 17% the assets held in its other bank subsidiary, Capital One Bank, to $83 billion, moving it up one place to 25th in total assets.
"We conclude that the proposed P&A transaction does not pose a risk to the U.S. banking or financial system," the letter said.
The OCC also noted that Capital One's combined market share for deposits and liabilities would remain unchanged at 1.35%, far below the 10% limit.
Commenting on the bid, several consumer groups had expressed concerns about how big Capital One's credit card business could become following the acquisition and that fair-lending allegations against the acquirer were still pending.
"We are very pleased that the OCC has approved our acquisition of the HSBC US Card business," Capital One spokesperson Julie Rakes said in an email. "We look forward to the positive impact the acquisition will have on our customers, associates and shareholders."
In its approval letter, the OCC said Capital One had made a 10-year commitment to invest $180 billion in new community development lending. The pledge includes $28.5 billion for home mortgage and home equity loans; $22.5 billion for small businesses and small farms; $25 billion for affordable housing development and commercial revitalization; $104 billion for consumer lending for low- and moderate-income borrowers; and $450 million in grants to support community services such as housing and financial education.
John Taylor, the president and chief executive of the National Community Reinvestment Coalition, said it is significant that the OCC made note of the company's commitment in the approval letter.
"In approving this [deal], they base it on the commitments and representations made in the application and by the applicants through this process, [and] that is clearly one of the commitments they made," Taylor said. "That's a big deal for us."
Still, Taylor said his group remains concerned about the OCC's having recently downgraded the Community Reinvestment Act rating for one of Capital One's subsidiaries, citing problems with its credit card practices. He also highlighted the fact that a majority of the company's small-business lending has now shifted to credit cards.
The OCC letter said a number of commenters had complained about Capital One's high fees and rates on subprime credit cards, and had accused the company of abusive debt collection practices.
Consumer groups had also asked the agency to hold a hearing on the proposed acquisition, but the OCC said the written comments would be sufficient.
