Delaware nonprofits could see millions from Capital One benefits plan

WILMINGTON — While regulators weigh the proposed Capital One and Discover Bank merger, Capital One has pledged billions of dollars in lending and other philanthropic investments, including $35 million to Delaware nonprofits.

The community benefits plan offers $265 billion over five years to various initiatives across the country and was proposed back in July to federal banking regulators as part of a deal to acquire Discover Bank. Included in that plan is $200 billion to low-and middle-income consumers, $44 billion in community development work and millions more to nonprofits, small businesses and minority-owned institutions.

While Capital One officials did not detail to the Delaware Business Times specifics on how the $35 million investment in Delaware would look, spokeswoman Sarah Craghill noted that it would be directed toward “advancing and strengthening existing investments” that already align with Capital One’s programs in workforce development and other asset-building initiatives.

“Our commitments to financial inclusion and well-being are core to who we are as a company,” Capital One CEO and Chairman Richard Fairbank said in a prepared statement. “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.” 

Capital One and Discover first announced the proposed $35 billion all-stock merger back in February, stating that both of the largest credit issuers in the country would join together. In the deal, Capital One would acquire one of the biggest payment-processing networks in the country, rivaling other financial giants in the space like MasterCard and Visa.

These payment processing networks serve as an intermediary between the business and the card issuer; whenever a customer makes a purchase, the card issuer provides the customer the funds to complete the purchase while the network supports that purchase.

Right now, Capital One relies on two other networks to complete those transactions. But with the acquisition of Discover, the financial institution would essentially be able to bring that service in-house for all debit and some credit cards by 2025. 

The deal, while slow-moving, comes at a time when many Americans hold thousands in credit card debt. The Federal Reserve of New York reports that outstanding credit card balances sit at $1.14 trillion, or 5.8% up from the same point of time last year. However, the deal is not without its critics, as Capital One customers filed a lawsuit to block the merger, citing that it would reduce competition and raise prices.

Capital One’s proposed community reinvestment plan serves as a promise to ease the merger, although all banks chartered and insured by the U.S. government are strongly encouraged to offer such plans to help meet the credit needs of the communities where they do business.

The proposed community investment plan overall includes $600 million in support for Community Development Financial Institutions (CDFIs), or lenders that specifically target underserved communities. In Delaware, Capital One has launched the Skills-Based Pro Bono program, where associates connect with small business owners and nonprofit leaders here to help source financing through CDFIs.

That program has helped organizations like Delaware Futures, a nonprofit that provides academic and social support for disadvantaged high school students. Enza Rocco, the executive director of Delaware Futures, wrote to the Federal reserve Bank that the Skills-Based Pro Bono program has supported the organization. In addition, she wrote that Capital One has helped transport students from all over the state as well as offered $5,000 in gift cards to students who face food insecurity.

“We believe that the relationship between Delaware Futures and Capital One will continue to have a great impact on our ability to successfully assist students pursue their goals,” Rocco wrote. “We would like to express our excitement and gratitude to Capital One and Discover and the partnership with Delaware Futures.”

Capital One would also start a Small Business Ventures lending program, which would offer a credit card to small businesses that may struggle to find financing to meet their needs, including below-market rate pricing. Another feature included in the proposed community reinvestment plan involves allocating $5 billion to spend on diverse suppliers, or a 70% increase over the course of the five-year plan.

The WRK Group CEO Logan Herring also wrote to the Federal Reserve Bank that Capital One has long since been a strong corporate partner for the organization, which has been leading the revitalization of Delaware’s Riverside neighborhood. In the last five years, the WRK Group has constructed 141 mixed-income homes at Imani Village and opened the Teen Warehouse and offered workforce training programs to 200 teens per year. The Kingswood Comunity Center also doubled the number of families, youths and seniors it reached through its program.

“Capital One has been instrumental in our success,” Herring wrote. “In 2018, Capital One donated a former school building to the project, which has been renovated for use by the Teen Warehouse. …. [it] would not be serving the number of youth it serves today without this contribution.”

“In our experience, Capital One has been a strong community partner, helping to make Wilmington and Delaware a better place to live,” Herring added in his letter.