Capital One

Capital One Financial Corporation

File:Capital One logo.svg
Type	Public
Traded as	NYSE: COF S&P 100 Component S&P 500 Component
Industry	Financial services
Founded	1988 (1988) Richmond, Virginia, U.S.
Founder	Richard Fairbank, Nigel Morris
Headquarters	Tysons Corner, Virginia, United States (McLean mailing address)
Key people	Richard Fairbank (Chairman, President and CEO) Stephen S. Crawford (Head of Finance and Corporate Development) R. Scott Blackley (CFO)
Products	Retail banking, Credit cards, Loans, Savings
Revenue	US$25.501 billion (2016)
Operating income	US$5.80 billion (2016)
Net income	US$3.75 billion (2016)
Total assets	US$357.033 billion (2016)
Total equity	US$47.514 billion (2016)
Number of employees	47,300 (2016)
Website	www.capitalone.com

Capital One Bank in Wake Village, Texas

Capital One Financial Corporation is an American bank holding company specializing in credit cards, home loans, auto loans, banking and savings products.

Capital One is the eighth-largest bank holding company in the United States when ranked by assets and deposits. The bank has 755 branches including 18 café style locations for its Capital One 360 brand and 2,000 ATMs. Capital One Financial is ranked #112 on the Fortune 500, and also conducts business in Canada and the United Kingdom. The company helped pioneer the mass marketing of credit cards in the 1990s, and as of 2003 it was the fourth-largest customer of the United States Postal Service.

Its corporate offices are located in Tysons Corner, Virginia.

In 2016, 62% of the company's revenues were from credit cards, 26% was from consumer banking, 11% was from commercial banking, and 1% was from other.

History

Monoline credit card company (1994-2004)

Capital One retail footprint

On July 27, 1994, Richmond, Virginia-based Signet Financial Corp announced the spin off of its credit card division, OakStone Financial, naming Richard Fairbank as CEO (Signet Banking Corp is now part of Wells Fargo). Signet renamed the subsidiary Capital One in October of that year. The spinoff was concluded February 28, 1995, making Capital One fully independent.

Unlike other diversified financial services firms, Capital One began as a "monoline", meaning the vast majority of its business was in consumer lending, particularly credit cards. Remaining a monoline is risky, as it can be very profitable industry in good times, and markedly unprofitable in bad. Most consumer-lending monolines in the past twenty years have either gone out of business (e.g., The Money Store, NextCard, Royal Acceptance) or have been acquired (e.g., MBNA, Beneficial, First USA); Capital One is notable for having experienced neither.

Capital One attributed its relative success as a monoline to its use of data collection to build demographic profiles, allowing it to target personalized offers of credit direct to consumers.

In 1999, Capital One was looking to expand beyond credit cards. CEO Richard Fairbank announced moves to use Capital One's experience with collecting consumer data to offer loans, insurance, and phone service.

Expansion into retail banking (2005-present)

While many other monolines were acquired by larger, diverse banks, Capital One expanded into retail banking with a focus on subprime customers. This was accomplished through the acquisition of several retail banks. Capital One acquired New Orleans, Louisiana-based Hibernia National Bank in 2005, Melville, New York-based North Fork Bancorporation, and Chevy Chase Bank in 2008.

During the 2007 subprime mortgage financial crisis, Capital One closed its mortgage platform, GreenPoint Mortgage, due in part to investor pressures. Capital One Financial Corporation received US$3.56 billion from the Emergency Economic Stabilization Act of 2008. On June 17, 2009, Capital One finished buying back the stock the company issued to the U.S. Treasury paying a total of US$3.67 billion. The U.S. Securities and Exchange Commission has criticized Capital One's conduct during the crisis, claiming that the company failed to provide accurate reporting of the losses they incurred. Capital One was required to pay $3.5 million in penalty, but has not been required to directly address the allegations of wrongdoing.

In June 2011, ING announced the sale of its American ING Direct division to Capital One for cash and shares worth US$9 billion. On August 26, 2011, the Federal Reserve Board of Governors announced it would hold public hearings on the Capital One acquisition of ING Direct, and extend to October 12, 2011, the public comment period that had been scheduled to end August 22. The move came amidst rising scrutiny of the deal on systemic risk, or "Too-Big-to-Fail," performance under the Community Reinvestment Act, and pending legal challenges. A coalition of national civil rights and consumer groups, led by the National Community Reinvestment Coalition, were joined by Rep. Barney Frank to challenge immediate approval of the deal. The groups have argued that the acquisition is a test of the Dodd-Frank Wall Street Reform and Consumer Protection Act, under which systemically risky firms must demonstrate a public benefit that outweighs new risk before they are allowed to grow. Kansas City Federal Reserve Bank head Thomas M. Hoenig was also skeptical of the deal. In February 2012, the acquisition was approved by regulators, and Capital One completed its acquisition of ING Direct. Capital One received permission to merge ING into its business in October 2012, and rebranded ING Direct as Capital One 360 in November 2012.

In August 2011, Capital One reached a deal with HSBC to acquire its U.S. credit card operations. Capital One paid US$31.3 billion in exchange for US$28.2 billion in loans and $600 million in other assets. The acquisition was completed by May 2012.

Like many other retail banks, Capital One has been slowly decreasing its number of physical locations. In 2015, the bank closed 186 locations.

On July 8, 2015, Capital announced that it has acquired Monsoon, a design studio, development shop, marketing house and strategic consultancy.

In August 2015, Capital One agreed to acquire General Electric Co.'s Healthcare Financial Services unit for USD $9-billion. The transaction involves USD $8.5-billion of loans made to a wide array of sectors including senior housing, hospitals, medical offices, outpatient services, pharmaceuticals and medical devices.

In October 2016, Capital One acquired Paribus, a price tracking service, for an undisclosed amount.

Divisions

Capital One Auto Finance

Capital One Auto Financial Corporation is the parent company of Capital One Auto Finance Company, based in Plano, Texas. The company includes Summit Acceptance Corporation, which Capital One acquired in July 1998, and PeopleFirst Finance LLC, which was acquired in October 2001 and Onyx Acceptance Corporation, which Capital One acquired in September 2004. The companies were combined and rebranded as Capital One Auto Finance Corporation in 2003. As of 2012, Capital One Auto Finance is the largest Internet auto lender, as well as one of the top US auto lenders overall.

The company, which used to sell auto loans only through direct mail and auto dealerships, lets auto owners refinance existing auto loans and shoppers apply for new auto loans online. A decision usually comes within 15 minutes, after which the buyer receives a "blank check" for up to the approved auto loan amount, which the buyer uses to purchase a car. To the dealership, it is as if the buyer were paying cash. The checks can be used to purchase a new or used vehicle, or to refinance an existing auto loan with another lender.

CapitalOne 360

Activities announcing the opening of the CapitalOne 360 Café in Boston.

CapitalOne 360 is an online banking division of Capital One. The division originated in a separate company, ING Direct, which was founded in 2000 in Wilmington, Delaware as a brand for a branchless direct bank. In September 2007, ING Direct acquired 104,000 customers and FDIC insured assets from the failed virtual bank NetBank. Two months later, ING Direct acquired online stock broker Sharebuilder.

Capital One National Direct Bank

This is the online banking services from Capital One which used to offer various depository services such as checking accounts and money market accounts. This division of Capital One is no longer accepting new customers due to the acquisition of ING Direct and the introduction of Capital One 360. Various partnerships and promotions on these accounts were offered by Costco.

In June 2011, Capital One Financial Corporation purchased ING Direct USA from its Netherlands based parent, ING Group, paying US$9 billion (€6.3 billion). The sale was completed on June 16, 2011, with the CEO of ING Group at that time Jan Hommen saying the sale "marks a further important step in the restructuring of ING Group. Yet at the same time we are saying goodbye to a very successful business and a dedicated team...". Following the acquisition, ING direct was rebranded Capital One 360.

Level Money

In January 2015 Capital One acquired Level Money, a budgeting app for consumers. The app will remain a standalone application.

Paribus

In October 2016 Capital One acquired Paribus, a price tracking service for consumers. The app will remain a standalone application.

Divisions in Canada and the United Kingdom

Capital One commenced operations in Canada in 1996. Its head office is located in Toronto, Ontario at the North York Centre at Yonge Street & Finch Avenue. Unlike its diversified American parent, the Canadian business does not operate outside of the credit card market. In October 2008, Capital One Canada was named one of Greater Toronto's Top Employers by Mediacorp Canada Inc., which was announced by the Toronto Star newspaper.

The UK headquarters of Capital One is in Nottingham. Capital One in the UK is associated with customers with poor credit rating and very high APR credit cards, up to 35%. The company was once active in Spain, Italy, France and South Africa, but has since withdrawn from these markets.

Sports marketing

Since 2001, Capital One has been the principal sponsor of the college football Florida Citrus Bowl, rebranding it the Capital One Bowl in 2003. It sponsors a mascot challenge every year, announcing the winner on the day of the Capital One Bowl. Capital One is one of the top three sponsors of the NCAA, paying an estimated $35 million annually in exchange for advertising and access to consumer data. Capital One also sponsored an English soccer cup competition known as the Capital One Cup, from 2012 to 2016. They previously sponsored Sheffield United F.C. from 2006 to 2008.

Experiments and agreements

USPS agreements

In late 2002, Capital One and the United States Postal Service proposed a then-experimental negotiated services agreement for bulk discount in mailing services. The resulting three-year agreement was extended in 2006. In June 2008, however, Capital One had filed a complaint with the USPS regarding the terms of the next agreement, citing the terms of the NSA of Capital One's competitor, Bank of America. Capital One subsequently withdrew its complaint to the Postal Regulatory Commission following a settlement with the USPS.

Isis Mobile Wallet payment

On February 26, 2012, along with several other banks, Capital One announced support for the Isis Mobile Wallet payment system. However, in September 2013, Capital One dropped support for the venture.

ClearXchange

Main article: clearXchange

On February 19, 2014, Capital One became ¼ owner in ClearXchange;, a P2P (person to person) money transfer service designed to make money transfers to customers within the same bank and other financial institutions via mobile phone number or email address. The service will be available to Capital One Bank customers in the 2nd half of 2014. ClearXchange's other owners include Bank of America, Wells Fargo, and JP Morgan Chase.

Decoupled debit card

In May 2007, the company began an experiment that came to be known as a decoupled debit card. This card is novel in that prior to this launch, a debit card was always tied to a traditional financial institution, such as a bank or credit union.

CapitalOne's Visa-branded decoupled card did not require that an account be opened with a "merchant" financial institution, and was made in partnership with the Ukrop's Super Markets, a Richmond-based grocery-store chain, and Sheetz, a regional gas-station and convenience-store chain. The Ukrops card was also tied to the grocer's reward program.

That one-year experiment ended in May 2008, and was followed up with a national rollout of its own version of a decoupled debit card tied to its own reward program.

Charity

Capital One operates some charitable programs, such as the "No Hassle Giving" web portal, in which Capital One covers the transaction fees on customer and non-customer donations made through the site. The accountability organization National Committee for Responsive Philanthropy has been highly critical of Capital One's relatively low rate of giving, stating that "Capital One's philanthropic track record is dismal". The organization pointed out that Capital One's donations of 0.024% of revenue were much less than the industry median of 0.11% of revenue. Capital One has disputed the groups figures, saying that "... In 2011 alone, our giving totals are more than 6 times greater ($30 million) than the number given by the NCRP".

Criticism and legal actions

In July 2012, Capital One was fined by the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau for misleading millions of its customers, such as paying extra for payment protection or credit monitoring when they took out a card. The company agreed to pay $210 million to settle the legal action and to refund two million customers. This was the CFPB's first public enforcement action.

In August 2014, Capital One and three collection agencies entered into an agreement to pay $75.5 million to end a consolidated class action lawsuit pending in the United States District Court for the Northern District of Illinois alleging that the companies used an automated dialer to call customers’ cellphones without consent, which is a violation of the Telephone Consumer Protection Act of 1991. It is notable that this legal action involved informational telephone calls, which are not subject to the "prior express written consent" requirements which have been in place for telemarketing calls since October 2013.

2014 amendment to terms of use to allow personal visits

In 2014, Capital One amended its terms of use to allow it to "contact you in any manner we choose", including a "personal visit . . . at your home and at your place of employment." It also asserted its right to "modify or suppress caller ID and similar services and identify ourselves on these services in any manner we choose." Los Angeles Times writer David Lazarus commented that "Cap One has made deliberate decisions that seem intended to overreach and intimidate, confirming in the eyes of many the company's thoughtlessness and occasional ruthlessness". Emily Rusch, the executive director of the California Public Interest Research Group, found the company's assertion of a right to "spoof" Caller ID particularly disturbing, saying "Now more than ever, consumers need to be able to trust companies".

Capital One spokeswoman Pam Girardo responded that the company would not actually make personal visits to customers except "As a last resort, . . . if it becomes necessary to repossess [a] sports vehicle". Capital One also attributed its assertion of a right to "spoof" as necessary because "sometimes the number is 'displayed differently' by 'some local phone exchanges,' something that is 'beyond our control'".

Girardo told the New York Times that the company was "reviewing" the language involved. David Lazarus noted that "now that a little sunlight has been applied, the company is not as comfortable as it previously was with behaving like a total maniac. In the meantime, cardholders can make up their own minds. Do they want to believe the non-binding explanations of a company representative or the legally enforceable language that's currently in their written contracts?"

See also

• Capital One Tower
• Hibernia National Bank (acquired in 2005)
• North Fork Bank (acquired in 2006)
• Chevy Chase Bank (acquired in 2009)
• ING Direct (acquired in 2011)
• HSBC Credit Cards (acquired in 2012)

External links

• Official US site
• • Business data for Capital One: Google Finance
  • Yahoo! Finance
  • Reuters
  • SEC filings