Capital One’s Community Plan in Connection with Discover Acquisition

Capital One Financial Corporation (NYSE: COF) today announced a community benefits plan that commits more than $265 billion in lending, investment, and philanthropy over five years as part of its proposed acquisition of Discover Financial Services (NYSE: DFS). The plan was developed in partnership with the National Association for Latino Community Asset Builders (NALCAB), NeighborWorks America, the Opportunity Finance Network (OFN), and the Woodstock Institute.

This plan is twice as large as any other community commitment developed in connection with a bank acquisition and demonstrates that the combination of Capital One and Discover will create an opportunity to provide more lending, investment, and services to underserved communities than the institutions would undertake on a stand-alone basis.

These commitments will aim to expand economic opportunity for underserved consumers, including those in low- and moderate-income (LMI) neighborhoods, rural areas, and communities of color. It will support increased access to best-in-class products and services for unbanked or underbanked consumers as well as consumers across the credit spectrum and expand access to capital and opportunity.

“Our commitments to financial inclusion and well-being are core to who we are as a company,” said Richard Fairbank, Founder, CEO, and Chairman of Capital One. “That comes to life in our product portfolio, which serves the full spectrum of American consumers, and in the investments we make in our communities. We have a long history of developing innovative ways to serve these core constituencies, and we are committed to ensuring, through this community benefits plan, that our acquisition of Discover builds on our history of positive impact.”

In addition to a robust negotiating process led by the four community groups identified above, which collectively represent more than 800 nonprofit organizations nationwide, Capital One’s plan was informed by engagement with the company’s long-standing Community Advisory Council, more than 100 community organizations nationwide, and more than 100 local, state, and federal elected officials. This engagement included listening sessions with community organizations in key markets across Capital One’s and Discover’s footprint.

The plan is designed to enable greater access to safe and affordable housing; expand access to credit so small business owners can sustain and grow their businesses; increase access to credit for LMI consumers; build high-quality local infrastructure to facilitate the delivery of essential services; and support the development of schools, civic centers, and healthcare facilities that are vital to building strong and vibrant communities.

“This plan delivers high-impact, scalable solutions for low- and moderate-income communities, and its commitments and ambition reflect the robust, candid dialogue that drove its development,” said Andres Navarrete, Executive Vice President and Head of External Affairs at Capital One. “We have long valued community and customer feedback on our products, policies, and programs, recognizing that our partners are often the closest to the needs of the community, and we are deeply grateful to our negotiating partners and the many other community members and leaders across the country whose feedback and innovative ideas are reflected in this plan.”

Negotiating Partner Statements

“We’re thrilled to have had the chance to include our expertise and our members’perspectives in the development of a community benefits plan with Capital One,” said Marla Bilonick, President and CEO of NALCAB. “Capital One consistently and proactively seeks constructive community feedback—then takes it a step further by incorporating that feedback into their product and service delivery. We appreciate the chance to help guide their continued investment in communities, and we look forward to helping bring the plan to life.”

“We were proud to participate with Capital One in the development of the community benefits plan. We applaud Capital One’s efforts to bring national and local groups together around the table to hear and learn of the needs in communities. At NeighborWorks, we understand the need for intentional investments and bold partnerships driven by a commitment to transformational impact,” said Marietta Rodriguez, President and CEO of NeighborWorks America. “Capital One has been a dependable partner in improving the financial future of residents across the country, and this new community benefits plan will continue to build on that commitment by expanding support for a broader range of products and services, particularly benefiting underserved consumers.”

“OFN is committed to working with partners across the country to ensure our communities have access to affordable, responsible financial solutions,” said Harold Pettigrew, President and CEO of OFN. “Throughout this process, we were encouraged by Capital One’s ownership of areas where it has room for improvement and openness to discussing ideas beyond its comfort zone. We look forward to continuing to work together to deliver on the plan’s commitments and help drive capital to the communities that need it most.”

“We do not need another empty promise, a splashy marketing campaign, or re-packaging existing activity as something new,” said Horacio Mendez, President and CEO of Woodstock Institute. “Woodstock Institute came to the table to challenge Capital One to develop a community benefits plan that moves the industry forward and sets an ambitious standard for others to follow. While nobody got everything they asked for, everyone involved in this process recognizes that substantive change and progress have been made on important issues. Specific to Woodstock’s mission, Capital One’s commitment to fair and responsible lending, and to collaborate on advocacy issues and policies that reflect our common interests, creates a new and powerful alliance that can effectively advance systemic solutions for those most in need.”

A Comprehensive Community Benefits Plan

The five-year plan includes significant financial and programmatic commitments across community development, Community Development Financial Institutions (CDFIs), philanthropy and pro bono, consumer card and auto lending, small business and supplier diversity, and bank access. The following sections highlight key elements of Capital One’s commitments in each area.

Community Development

Capital One has ranked first or second among all banks in Community Reinvestment Act (CRA) -qualified community development lending by total dollar amount over the past six reported years and will expand on this record through $44 billion in capital for affordable housing, economic development, public infrastructure, and alternative energy. This community development commitment includes:

• Over $35 billion supporting affordable housing for LMI communities and individuals, including Low-Income Housing Tax Credit (LIHTC) investments, representing a nearly 30% increase over previously planned activities.
• Over $5 billion supporting solutions to challenges LMI communities face, including employment, food accessibility, healthcare, education, renewable energy and public infrastructure, via New Markets Tax Credits, alternative energy financing, and municipal lending.
• Continuing Discover’s partnership with the Delaware State Housing Authority (DSHA) to enable homeownership through bond purchases and investments in mortgage-backed securities. The commitment provides certainty of liquidity and funding to support DSHA homeownership programs offering interest rates at or below market, down payment or closing costs assistance to low to moderate income households who are first time homebuyers or seeking to refinance existing mortgages. The premium pricing in the predetermined forward commitment is passed through to borrowers in the rates or assistance offered.

Community Development Financial Institutions (CDFIs)

Capital One recognizes CDFIs as proven, highly effective organizations for delivering capital to underserved communities and connecting consumers to financial products and services. The commitment includes:

• $600 million in capital to nonprofit CDFIs focused on affordable housing, small business, and consumer lending, 6X Capital One’s and Discover’s planned activities.

Philanthropy and Pro Bono

Building on Capital One’s existing five-year, $200 million Impact Initiative, Capital One will significantly increase philanthropic giving and capacity-building efforts. This plan commits to a total of $575 million in philanthropy over its duration, representing a nearly 30% increase over previously planned activities. Included in this total is a $35 million commitment to philanthropic support for nonprofits in Delaware, including Discover’s CRA assessment area, and $20 million for Chicago-based organizations, a portion of which is incremental to Capital One and Discover’s historical support. New philanthropic investments include:

• $50 million increase in new grants to CDFIs over the duration of this community benefits plan, more than 3X planned CDFI grantmaking. These grants, in addition to the expanded CDFI loans and investments referenced above, will further enable CDFIs’ lending activities to small businesses and affordable housing, as well as small dollar consumer lending, and assist Capital One’s partners in building capacity and bolstering operations to deliver their services more effectively.
• $25 million increase in new grants and pro bono initiatives to support programs that enable homeownership, including down payment assistance, funding repairs, and pre-purchase and foreclosure prevention counseling.
• $25 million increase in new grants to support pre-development activities, resident services, and rent reporting initiatives in Capital One’s LIHTC-financed properties.
• $15 million increase in new grants to fund research related to artificial intelligence (AI), focusing on the integration of AI in the banking sector while emphasizing responsible implementation.

Capital One is committed to helping nonprofit organizations continue their critical work through an expanded pro bono program and a range of capacity-building services, including:

• 10X expansion of current pro bono associate volunteering program for nonprofits and small businesses.
• 5X expansion of current pro bono associate volunteering programs for CDFIs, with a focus on data and technology management and change management.
• Investing in long-term, interdisciplinary capacity-building engagements with community partners in data, cyber, infrastructure, machine learning, and AI, focused on strengthening the collective capacity and impact of the CDFI industry and fostering growth, innovation, and sustainability across the sector.
• Establishing a formal pro bono program to build the lobbying and advocacy capacity of nonprofit partners.
• 30% growth for the Capital One Insights Center and partnership-based research approaches to increase the number of research projects conducted and commissioned each year.
• Partnering with community groups to develop a shared agenda on key advocacy issues and policies that reflect Capital One’s and these organizations’ shared interests.

Consumer Card and Auto Lending

Capital One is deepening its long-standing commitment to serving and empowering consumers from across the credit spectrum with best-in-class consumer credit products. Since its founding, Capital One has enabled 42 million customers with subprime or no FICO scores when they opened an account with the bank to achieve prime or better FICO scores. Capital One is committed to supporting its customers’ financial well-being through tools and programs driving tangible and positive customer outcomes.

These programs include simple and flexible auto-pay options, automatic enrollment in credit card payment alerts, and one-click payments that have prevented over 25 million late payments and past due fees in the past year alone. Capital One has invested in:

• Free digital tools like CreditWise, which currently serves nearly 60 million customers and non-customers alike.
• A financial literacy partnership with Khan Academy, which has reached over 850,000 learners who have spent over 21 million minutes engaged with the content since its launch in July 2023.
• The Auto Navigator tool, which provides transparency and education to auto loan customers and non-customers alike.
• The Keep Customers in their Cars program, which has leveraged innovative loan adjustments and modifications to enable over one million customers, who at another lender may have experienced repossession, to stay in their cars. This program is specifically designed to ensure customers maintain ongoing access to mobility, a critical resource in accessing and maintaining jobs, affordable housing, healthcare and healthy food, and other essential services.

Capital One will build on this legacy by expanding access to its products and delivering transparency, education, and hands-on support throughout its customers’ financial lives, notably through the following commitments:

• $125 billion in credit card lending to LMI consumers and consumers who reside in LMI communities nationwide.
• $75 billion in automobile finance lending to LMI consumers and consumers who reside in LMI communities nationwide.
• Expanding the Secured Card unsecuring program (returning customers’ deposits) with the goal of unsecuring 90%+ of customers in good standing with Capital One and other bureau accounts once they have been a customer for two years. This represents a 15-20% expansion of this program and builds upon Capital One’s practice of auto-reviewing accounts for unsecuring eligibility to proactively support customers’ ability to improve their credit standing.
• Launching a “Second Look” auto loan program to refer consumers declined through Capital One’s Auto Navigator to CDFIs and provide pro bono and technical assistance to CDFI partners to enable greater scale and success in this effort.

In addition, Capital One will continue to empower customers to have greater control over their financial decisions. This support will include building on currently available resources that equip customers with accessible financial education, providing simple tools for customers to manage their finances, and supporting customers through financial setbacks. These initiatives include:

• Providing a streamlined ability to opt out of proposed credit line increases through a simple and easy-to-use digital interface, ensuring that customers can more easily control decisions regarding their available credit.
• $15 million in additional grant funding to credit counseling agencies (CCAs) over the duration of the community benefits plan, including more proactive referrals of customers to reputable and effective CCAs.
• Bringing an additional 600,000 borrowers into Capital One’s Keep Customers in their Cars program, helping these individuals at moments of need stay in their vehicles.

Small Businesses, Diverse Suppliers, and Diverse & Culturally Relevant Marketers

Capital One continues to invest in helping small business owners access the capital and tools they need to sustain and grow their businesses and expanding opportunities for diverse suppliers by committing to:

• Over $15 billion to small businesses and businesses in LMI communities to improve access to credit and capital.
• Launching Ventures Lending, a mission-based credit card focused on closing gaps in equity and opportunity targeted to traditionally underserved small businesses. This new product will provide below-market rate pricing, and Capital One will partner with CDFIs to originate lending and deliver wrap-around services designed to enhance the long-term viability of these businesses.
• Expanding opportunities for diverse suppliers to engage in Capital One’s supplier process, with $5 billion in anticipated spending with diverse suppliers, representing an over 70% increase to historic levels over the duration of this plan.
• 30% increase to historic levels in Capital One’s diverse and culturally relevant marketing spend over the duration of this plan.
• Delivering tools for small businesses as they build and grow, including Cash Flow Insights, a free digital dashboard to help small businesses track and project expected income and expenses, designed to help improve business financial health and stability with relevant insights.

Bank Access

Capital One’s retail business has been a leader in delivering innovative, market-leading products. Capital One is a national bank, serving a broad and diverse customer base through a unique blend of best-in-class digital and physical delivery channels. Capital One and Discover customers will be able to access branches in the company’s traditional bank footprint in the Washington, DC and New York metro areas and the Gulf Coast; Cafés in 21 of the top 25 MSAs; over 16,000 cash deposit locations; and more than 70,000 fee-free ATMs nationwide.

Capital One was the first large bank to completely eliminate overdraft fees, and remains the only large bank to offer overdraft protection free of charge on a checking account without fees or minimum balance requirements. Since eliminating overdraft fees in 2021, Capital One customers have saved over $500 million in potential fees. All of Capital One’s retail bank products come with no account maintenance fees, no minimum balance requirements, and no overdraft fees. Capital One’s flagship 360 checking product is fully Bank On certified, and the company has ranked #1 in US National Banking Overall Satisfaction for four years running, according to J.D. Power.

Capital One will build on this industry-leading position by further committing to support financial inclusion through enhanced products, services, and physical presence:

• Growing Capital One’s flagship Bank On certified checking accounts by at least 50% over the company’s current Bank On certified checking accounts.
• Enabling access to ~100,000 consumers with Individual Tax Identification Numbers (ITINs) through enhanced digital acceptance programs.
• Maintaining 30% of Capital One’s retail locations (branches and Cafés) in LMI neighborhoods to complement the company’s digital delivery channels and support continued neighborhood economic stabilization and investment.
• Opening new Capital One Cafés in LMI and underserved areas, providing significant community and consumer benefits, financial education programming, and free convening space for community groups and civic organizations.
• Ensuring that consumers are able to meet short-term liquidity challenges through a suite of new services and features, including developing new Savings Builder features that can be used with Capital One’s flagship savings product. These digital tools will include savings goals and auto-saving tools and be integrated into financial counseling workshops with nonprofit partners.
• Committing to working with CDFIs and credit unions to research and deliver viable and sustainable small-dollar loan products to consumers.
• Increasing Café community programming and resources to expand the reach of financial health support, including expanding the Café student ambassadors program, Money & Life mentoring, and workshops through community sponsorships.

Discover’s Customers, Employees and Communities

Recognizing Discover’s long history of customer service and long-standing partnerships, Capital One is also committing to:

• Following conversion of Discover deposits and credit card accounts to Capital One’s systems, ensuring Discover customers gain access to a broader set of financial products and services, including a unique mix of best-in-class digital tools, Capital One’s nationwide network of branches and Cafés, as well as tens of thousands of cash-load partner locations and fee-free ATMs.
• Committing to no layoffs of front line associates in connection with the proposed transaction.
• Growing Discover’s Customer Care Center in Chatham on the South Side of Chicago to meet Discover’s original goal of employing more than 1,000 individuals.
• Retaining Discover’s Customer Care Center in Whitehall, Ohio.
• Retaining Discover’s sole physical branch and CRA assessment area located in Greenwood, Delaware. This branch will convert to a Capital One physical branch following conversion of Discover deposit accounts to Capital One systems.

Capital One’s commitment to transparency and inclusivity will continue once the plan is finalized. Capital One will report on its progress to the Federal Reserve Board and the Office of the Comptroller of the Currency on an annual basis, update the firm’s Community Advisory Council during regularly scheduled meetings, and post a report on its website.

“Capital One and Discover have long been leaders in investing in our communities to help people live, work, and build wealth on their own terms,” said Kerone Vatel, Head of Community Impact and Investment at Capital One and Chair of the Capital One Foundation Board. “This plan affords everyday consumers across America the opportunity to navigate their finances with resilience. We will continue to forge collaborative partnerships that build on Capital One and Discover’s combined legacy of deep community investment centered on the needs of the people who live there.”

Capital One’s Acquisition of Discover

In February 2024, Capital One and Discover announced that they entered into a definitive agreement under which Capital One will acquire Discover in a landmark deal. The transaction is expected to close in late 2024 or early 2025, subject to satisfaction of customary closing conditions, including regulatory approvals and approval by the shareholders of each company. The Community Benefits Plan is subject to the closing of the Discover transaction.

Annual results of this commitment could fluctuate from year to year based on market conditions and macroeconomic factors. If market conditions and macroeconomic factors worsen, safety and soundness will remain the company’s primary priority. Capital One will discuss proposed material changes to this community benefits plan with its negotiating partners.

More information on Capital One’s agreement to acquire Discover Financial Services can be found here.

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