A year after Capital One Financial announced a community benefits program in connection with its proposal to buy Discover Financial Services, the card issuer giant is still short on specifics.

Last July, Capital One announced the eye-popping $265 billion plan to invest in communities where it offers its banking services, in collaboration with the National Association for Latino Community Asset Builders, NeighborWorks America, the Opportunity Finance Network and the Woodstock Institute. In the months since the plan was announced, the partnering organizations have yet to flesh out the details for the plan’s execution and what it might mean for the people they serve. 

Immediately after the plan was announced last July, there were numerous press inquiries and conversations with the company, Woodstock Institute CEO Horacio Mendez said in a May interview. But as the newness of the announcement faded, “there really wasn’t anything for us to do but wait,” Mendez said. 

Meanwhile, critics assert that the community benefits plan dollar figure is inflated, and some worry the bank may not stick to the plan in a political environment that has changed since the re-election of President Donald Trump. 

Federal agencies shift gears on CRA

Support for that fear emerged this month when the Federal Reserve Board, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency issued a notice to rescind a 2023 plan to modernize the Community Reinvestment Act.

That rule update, proposed during the Biden administration, would have increased regulatory requirements for banks seeking to satisfy the 1977 law aimed at increasing financial inclusion and improving access to credit for low-income and minority communities.

The rule update was initially scheduled to take effect on April 1, 2024, but after bank groups sued the federal agencies to halt the edict that year, implementation dates for substantive portions of the revised rule were delayed to 2025 and 2026. In March, the Trump administration told an appellate court overseeing the litigation that it would move to rescind the rule update. Aside from increasing regulatory burdens, critics of the rule update have contended it increased uncertainty for banks while the two sides battled in court.

While 1995 regulations remain in place for now, the litigation has left banks wondering whether or not they needed to change course, the Fed vice chair for supervision, Michelle Bowman, has said. The older version of the rule gave financial institutions more leeway to balance the needs of local communities with the “safe and sound operation” of their businesses, the three agencies said in their rescission proposal.

“Returning to the 1995 CRA regulations at this time, in staff’s view, would confirm for banks that they do not need to allocate resources toward preparing for the 2023 CRA Final Rule,” the July 16 federal agencies’ proposal said. 

What’s the plan?

As the Trump administration was reversing course on the rule update, Capital One closed its acquisition of Riverwoods, Illinois-based Discover in May.

In conjunction with swallowing the card network, Capital One’s community benefits plan proposed $44 billion in “community development financing,” $600 million for community development financial institutions, and $575 million in philanthropy over five years. In addition, it proposed $200 billion in lending to low- to middle-income consumers; $15 billion for small business lending and $5 billion in “spending with diverse suppliers: over that period, the company said in a July 2024 press release.

The $600 million directed to the financial institutions for “affordable housing, small business, and consumer lending” was six times what Cap One and Discover had previously planned, the release said.

Though Capital One consulted with the four organizations to develop the plan, it has not yet determined how the plan will be implemented, some leaders for the organizations said in interviews. 

In an April interview, Marla Bilonick, president and CEO of the National Association for Latino Community Asset Builders, said the group would soon be “getting down to brass tacks and executing on it.” In a follow-up email sent via her spokesperson, Bilonick said this month that NALCAB couldn’t comment further on the status of their talks until after the organization meets with Capital One.

Woodstock’s Mendez noted in May that Capital One had scheduled a meeting in the next week or so to reconnect and discuss the plan’s execution nationally and in Chicago, he said.

The Woodstock Institute, a research and policy nonprofit focused on “economic justice and racial equity within financial systems,” has since had conversations with Capital One in which they discussed possibly arranging town halls with the public to assess the location of a Capital One Café in Chicago. The bank’s cafés are retail branches that double as a place for consumers to grab coffee and food, meet with friends or work on a laptop.

The nonprofit and the bank also discussed arranging meetings with other local nonprofits and hiring one or two new staffers to manage the bank’s Chicago commitments, Mendez noted in a follow-up email to Payments Dive.

Mendez said he has had regular meetings with Capital One’s policy team, and the company is responsive to his calls and emails. “So far, I’m feeling pretty good about our ability to have honest and challenging communication about stuff that we like and stuff that we’re concerned about,” Mendez said in May. 

NeighborWorks America and the Opportunity Finance Network declined multiple requests for comment. Payments Dive filed an open records request with NeighborWorks, a congressionally chartered nonprofit focused on affordable housing, asking for records regarding its involvement in Capital One’s community benefits plan. The organization has not supplied any records responsive to the April 15 request, despite noting on its website that it’s subject to the Freedom of Information Act. 

No specific plan for program dollars

In an interview, Capital One’s executive vice president and head of external affairs, Andy Navarrete, offered few specifics about implementation of the plan beyond the initial press release. In that June interview, he disputed the notion that the partner organizations weren’t informed about the execution of the community benefits plan. He emphasized that the plan was contingent on the deal closing, noting that just happened in May. By way of explanation, he also underscored the plan’s five-year duration. 

“When you sort of think about the dollar commitments, they are going to be allocated and implemented over that period of time,” Navarrete said. “So, it shouldn't be surprising at all that we haven't specifically defined exactly where all of those dollars are going today.”

The company confirmed that it had its kick-off meeting with its partners and plans to work with them to implement the community benefits agreement, but did not disclose when the meeting occurred. 

“With an investment this meaningful, and a five-year deployment plan, we are taking a thoughtful approach and actively working with our community partners to plan the most effective way to invest and drive positive impact,” a spokesperson for the bank said in a follow-up email. “To date, we have provided meaningfully more transparency into the detail of our plan than any prior CBP negotiated by other parties. We are committed to continuing to be transparent while we deliver in the years to come.”

Capital One has met with its key collaborators, and the company plans to meet with members of its Community Advisory Council, who also contributed to formation of the plan, Navarrete said during the June interview.

As part of the plan, the Woodstock Institute pushed for Capital One to retain a Discover customer care center in the Chatham neighborhood on Chicago's South Side; to open two cafés in Illinois; and to maintain its three current cafés in the state, Mendez said. The company has about 60 such cafés nationwide, including three in Chicago, according to its website, though the Chicago locations are not in low-income areas.

Navarrete said the company is looking to open another café elsewhere in Chicago and in other low- and middle-income communities across the country. 

Critics question plan implementation

Critics and insiders of Capital One’s community benefits plan have expressed skepticism about whether the company is truly committed to execution of the plan.

Community benefits agreements like Capital One’s plan play a role in getting regulatory approval for mergers and acquisitions, said Terri Friedline, a professor of social work at the University of Michigan. (Friedline previously served as an expert witness in an unrelated lawsuit against Capital One, which was later dropped.)

Besides persuading regulators to approve bank mergers, elements of these community benefits plans could generate profits for the bank, Friedline said.

“Lending to economically disadvantaged and/or Black and brown communities — that should already be what banks and other finance companies are doing,” Friedline said. “But having it in the form of a community benefits agreement means that it sounds like they’re doing something extra, or something that is generous on their part. But it's still an activity that traces back to their own bottom line.”

The Community Reinvestment Act of 1977 doesn’t mandate that banks implement community benefits agreements, but the pacts serve as a way for communities to hold banks accountable for what they’re required to do under the CRA, she explained.

Past community investment plans include a 2018 Nashville plan for jobs, community services and affordable housing; a $1 billion Denver affordable housing plan in 2005; and a $2.8 billion Atlanta project in 2006, according to the Urban Institute.  

Such plans help bolster the banks’ reputations among their employees and the communities they serve, said Harry M. Jansen Kraemer, clinical professor of management and organizations at Northwestern University who is also a former Baxter International CEO and chairman. 

“The larger you are, the more you’re going to have to do to make an impact in terms of people thinking you’re doing something worthwhile,” Kraemer said.

Some critics have said the company’s $265 billion figure is misleading. An analysis of Capital One’s plan by the National Community Reinvestment Coalition asserts that it amounts to $5 billion in new lending, investment and grant activity. The group is a collection of organizations that seek to address racial and socio-economic inequities, particularly with respect to financial well-being.

In reality, the community benefits plan reflects what both Discover and Capital One were doing prior to the merger, but the $265 billion figure is “meant to make it look really fancy,” said NCRC Senior Policy Advisor Kevin Hill.

Navarrete said the NCRC’s claim that the $265 billion community benefits plan is not much more than what each company had done before was factually incorrect. Capital One is “the largest provider of bank uncertified accounts in the country, and we’re increasing our role in that space significantly,” Navarrete said. “Whether you look at this quantitatively or qualitatively, this goes well beyond any [community benefits plan] previously negotiated by any organization.”

Who monitors Capital One’s progress?

NCRC’s Hill raised questions about whether Capital One will uphold its commitments. “They probably expect the regulators to not pay attention to it past the merger approval if they do walk away,” Hill said. 

An OCC spokesperson said the agency doesn’t monitor compliance with community benefits agreements, nor does it enforce these agreements. The Federal Reserve declined to comment when asked whether it verifies that such agreements are executed. 

To update the public on its progress, Capital One will release an interim report at the end of this year, followed by additional reports in June of the fiscal year after that, Navarrete said. 

Capital One’s commitment to financial inclusion is central to its identity, as is providing access to credit for a spectrum of American consumers, the company spokesperson said.