Capital One Bid For ING Direct Approved By Federal Reserve (NYSE: COF)
The Federal Reserve approved Capital One’s bid to buy ING Direct for $9.2 billion. Capital One will become the fifth-largest consumer bank by deposit size when the acquisition is finalized. With the acquisition of ING, Capital One will control more than $200 billion in deposits.
Capital One responded to consumer groups worried about the acquisition saying nothing will change for customers of ING. The California Reinvestment Coalition was one of the consumer groups that spoke out about the deal. Its executive director, Alan Fischer, said, “A concern from the beginning was that ING would go away and the bank that people liked as an Internet bank would be replaced by fees and other bad consumer practices.”
The consumer groups worried that the acquisition of the online bank by Capital One would translate into new and higher fees for ING’s existing customers. Capital One spokeswoman Amanda Landers said that ING’s policies would not change. She stated, “Account servicing and functionality will remain the same. Customers will still enjoy the competitive rates, no fees, and the same experience they’ve come to know and love from ING Direct.”
Some ING Direct customers reacted with outrage when the deal was announced. ING Direct accounts have many features that customers find appealing, a main reason why the company is so popular. The company pays relatively high interest rates on deposits and has low fees for its accounts. The company also offers no ATM fees, no monthly maintenance fee, and no overdraft fees. ING customers can obtain an overdraft line of credit for their accounts that have an interest rate of 11.25%.
Capital One’s business model has faced increased scrutiny since the deal was announced and consumers have criticized Capital One’s fees and policies. They have been especially critical of Capital One’s policy of automatically enrolling customers in an overdraft protection program. Capital One basic rewards checking has a monthly fee of $8.95, ATM fees, and an overdraft fee of $35 per occurrence.
Capital One started out as a credit card company in 1988, and still relies on profits from its credit card business today. Credit cards represent 28% of the bank’s total assets. Capital One has increasingly moved into consumer banking since 2005 by purchasing smaller banks. Capital One’s high-interest savings accounts and rewards checking accounts are heavily marketed across the nation.