Capital One Financial Corp. Overview

Capital One Overview

Through its subsidiaries, Capital One Financial Corp (also known as Capital One) provides a variety of commercial and retail banking, credit card, and other financial services. In addition to checking and savings accounts, it also offers loans for new and used cars, refinancing services, capital market solutions, commercial and small business lending, investment services, credit and debit cards, and loans for individuals and small businesses. Treasury management, merchant services, depository services, online and mobile banking are just a few of the services offered by Capital One. Operating in the US, UK, and Canada are these companies. The headquarters of Capital One are in McLean, Virginia, in the US.

Key and Significant Facts.

Founding year: 21st July 1994 at Richmond Virginia US.

Industrial ranking: The company comes in at the 99th position on the Fortune 500 list and at 9th on the list of the 100 best companies to work for.

In terms of purchase volume in 2016, it ranked fifth behind American Express, JPMorgan Chase, Bank of America, and Citigroup.

Founders: Richard Fairbank and Nigel Morris.

Industry type: banking and finance industry.

Trading type: Capital One is traded in the NYSC trade market as COF.

Workforce Strength: The company has a workforce strength of 51,981 staffs as at 2020.

History

(1994 – 2004) Monoline credit card company.

Richard Fairbank was named as the company’s CEO in an announcement made on July 21, 1994 by Richmond, Virginia-based Signet Financial Corp, which is now a subsidiary of Wells Fargo. Capital One was given a new name by Signet in October 1994, and the spin-off was finished in February 1995.

Capital One was a monoline bank at that time, which means that all of its income came from a single product, in this case, credit cards. This tactic poses a risk because it might result in losses in trying times. Capital One credited its use of data collection to create demographic profiles, which allowed it to target customers directly with customized credit offers, for its comparatively good performance as a monoline.

Company’s expansion into auto loans

In 1996, Capital One switched from using teaser rates to bring in new customers to more creative strategies that would draw more clients to their line of business. Customers were leaving in favor of rivals who provided no-annual-fee accounts and higher loan balance ceilings. Co-branded, secured, and joint account credit cards were developed by the business. Capital One received federal government approval to launch Capital One FSB in the middle of 1996. This gave the business the ability to hold onto deposits made on secured cards, lend against them, and even make auto installment loans.

The UK and Canada were added to Capital One’s business operations in 1996. This allowed the business to market its credit cards to a sizable international market. According to a 1997 article in Chief Executive, the business had more than nine million clients and held credit card receivables worth $12.6 billion. The business was included in the Standard & Poor’s 500, and its stock price first crossed the $100 threshold in 1998.

Summit Acceptance Corporation, a provider of auto financing, was purchased by Capital One in July 1998.

Capital One sought to diversify its business beyond credit cards in 1999. Capital One’s CEO Richard Fairbank announced plans to use the company’s knowledge of data collection to offer loans, insurance, and phone services.

Capital One purchased PeopleFirst Finance LLC in October 2001. In 2003, the businesses were merged and given the new name Capital One Auto Finance Corporation.

Capital One and the USPS proposed a negotiated services agreement (NSA) for bulk discounts on mailing services in the latter half of 2002. The subsequent three-year contract was prolonged in 2006.

Vehicle loan financier Capital One purchased Onyx Acceptance Corporation in January 2005.

Expansion into retail banking (2005–present)

Capital One bought Hibernia National Bank in 2005, marking the company’s entry into retail banking and making it the first monoline credit card issuer to do so. For $4.9 billion in cash and stock, it acquired Hibernia, which was based in New Orleans, Louisiana. For $13.2 billion in cash and stock, it acquired North Fork Bank of Melville, New York, in 2006. Its reliance on the credit-card business alone was significantly reduced through the acquisition of retail banks. In 2007, the business also paid $700 million for Netspend, a provider of prepaid debit cards.

Due in part to investor pressure, Capital One closed its mortgage platform, GreenPoint Mortgage, during the subprime mortgage financial crisis of 2007. Capital One was criticized by the U.S. Securities and Exchange Commission for its actions during the crisis, specifically for allegedly understating auto loan losses during the 2007–2008 financial crisis. Capital One paid $3.5 million to settle the lawsuit in 2013, but was exempt from having to address the accusations of wrongdoing. Capital One received a $3.56 billion investment from the US Treasury in 2008 as a result of the Troubled Asset Relief Program.Capital One completed the $3.67 billion repurchase of the stock it had issued to the U.S. Treasury on June 17, 2009, giving the Treasury a profit of more than $100 million.

Chevy Chase Bank was purchased by Capital One in February 2009 for $520 million in cash and stock.

In January 2011, Capital One purchased the private credit card portfolio of the Canadian-based Hudson’s Bay Company from Synchrony Financial, which was formerly known as GE Financial.

In April 2011, Capital One and Kohl’s agreed to a seven-year, undisclosed-amount agreement for Capital One to manage Kohl’s private label credit card program, which had previously been serviced by Chase Bank.  In May 2014, the two companies’ agreement was extended.

HSBC and Capital One agreed that Capital One would take over its U.S. credit card operations in August 2011. For $28.2 billion in loans and $600 million in other assets, Capital One paid $31.3 billion. In May 2012, the acquisition was finalized. Privately issued credit cards for businesses like Saks Fifth Avenue, Neiman Marcus, and Lord & Taylor that were previously managed by HSBC were also included in the acquisition.

Along with a number of other banks, Capital One declared public backing for the Isis Mobile Wallet payment system in February 2012.  However, Capital One stopped funding the project in September 2013.

Capital One closed 41 branches in 2012.

In February 2014, Capital One acquired a 25% stake in ClearXchange, a peer-to-peer transaction money transfer service that enables customers of the same bank and other financial institutions to send electronic funds transfers to one another via email or mobile phone number. Early Warning purchased ClearXchange in 2016.

A consumer budgeting app called Level Money was purchased by Capital One in January 2015.

In order to leave 174 operating branches in the Washington, D.C. metro area, Capital One closed a number of branch locations in 2015.

The business bought Monsoon, a design studio, development shop, marketing agency, and strategic consultancy, in July 2015.

For $9 billion, Capital One purchased General Electric’s Healthcare Financial Services division in 2015, which included $8.5 billion in loans to healthcare-related businesses.

For an undisclosed sum, Capital One purchased the price tracking service Paribus in October 2016.

Walmart and Capital One reached an agreement in July 2019 for Capital One to manage Walmart’s private label and co-branded credit card programs, which were formerly managed by Synchrony Financial.

Venture X, a $395 annual fee travel rewards credit card, was launched by the company in November 2021.

Signing out of mortgage banking

Sanjiv Yajnik, President of Financial Services, stated that the mortgage market was too competitive in the low rate environment for the business to be profitable in November 2017. On November 7, 2017, the company stopped offering mortgage origination services and let go of 1,100 employees. The first closure, of the GreenPoint Mortgage unit, took place on August 20, 2007, and this was the second. When Capital One paid North Fork Bancorp Inc. $13.2 billion in December 2006 to acquire GreenPoint, North Fork Bancorp Inc. With the acquisition of online bank ING Direct USA in 2011, the mortgage industry made a comeback..

Divisions

Capital One operates three divisions currently which are:

• Credit Card Division
• Consumer Banking Division
• Commercial Banking Division

Credit Card Division: After JPMorgan Chase and Citigroup, Capital One is the third-largest credit card issuer in the world and offers credit cards in the US, Canada, and the UK. Credit cards accounted for 47.3% of all outstanding loans at Capital One as of December 31, 2018, with $107.350 billion in credit card debt owed in the US and $9.011 billion in credit card debt owed in Canada and the UK.

Consumer Banking division: Along with retail and auto loans, Capital One also provides banking services, such as checking, savings, and money market accounts, through its branches and direct bank. Retail loans totaled $2.864 billion and auto finance loans totaled $56.341 billion as of December 31, 2018, respectively, accounting for 22.9% of the company’s total loan portfolio.

Commercial Banking Division: Commercial, multifamily, and industrial properties were the security for $70.333 billion in outstanding loans from Capital One as of December 31, 2018, or 28.6% of all loans outstanding.

Criticisms and legal actions. (scandals)

No matter how perfect a company might seem to be or how successful they may be, they have some flaws as flaws are inevitable. Here are some notable flaws of the company.

Penalties for deceiving clients into paying more for services

The Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau fined Capital One in July 2012 for deceiving millions of its customers, including by requiring them to pay extra for payment protection or credit monitoring when they applied for a card. In order to end the legal action, the company consented to pay $210 million and refund two million customers. The CFPB’s first public enforcement action was this one.

Dialing customers’ phones automatically

In August 2014, Capital One and three collection agencies reached an agreement to pay $75.5 million to settle a consolidated class action lawsuit that was ongoing in the United States District Court for the Northern District of Illinois. The lawsuit claimed that the companies violated the Telephone Consumer Protection Act of 1991 by using an automated dialer to call customers’ cellphones without their permission. The fact that this legal action involved informational phone calls, which are exempt from the “prior express written consent” requirements that have applied to telemarketing calls since October 2013, is noteworthy.

2014 terms of use amendment allowing personal visits

Capital One updated its terms of service in 2014 to permit “personal visits at your home and at your place of employment” in addition to “contacting you in any manner we choose.” Furthermore, it stated that it was within its rights to “modify or suppress caller ID and similar services and identify ourselves on these services in any manner we choose. “According to the business, it won’t actually visit clients personally “except as a last resort,… if it becomes necessary to repossess sports vehicle.” Additionally, Capital One stated that it was necessary to assert the right to “spoof” because “sometimes the number is “displayed differently” by “some local phone exchanges,” which is “beyond our control.”

2019 Security Breach

On July 29, 2019, Capital One made a public admission that they had discovered unauthorized access had taken place ten days earlier by a person who had violated the id confidentiality of 106 million people in the United States and Canada. Paige Thompson, a former software engineer for Capital One’s cloud hosting provider Amazon Web Services, was detained by the FBI. According to Capital One, Thompson had access to 80,000 bank account numbers, 140,000 Social Security numbers, 1 million Canadian social insurance numbers, and an undetermined number of customer names and addresses. For those who were impacted by the breach, Capital One started providing free credit monitoring services.

Lawsuits

A number of law firms, including Colson Hicks Eidson, Franklin D. Azar and Associates P.C., and others, filed lawsuits in federal[103] and circuit courts against Capital One and its employees.

Additional lawsuits were brought against GitHub and Amazon on the grounds that they knew about the exploit but did nothing to close the hole.

Government investigations

The bank disclosed in 2015 that it was the subject of a federal investigation into allegations of bank fraud, money laundering, and potential racketeering. Investigators from the government would only confirm that it was being looked into for “unspecified charges” without providing any additional information.

Capital One was penalized $100 million in 2018 for failing to monitor, identify, and stop money laundering. Documents used to support charges noted that Capital One failed to submit reports of suspicious activity, had issues with its risk assessment and remote deposit capture, and generally had flaws that jeopardized national bank security controls. An extensive investigation into the bank claimed that money had been diverted to safe havens outside of US jurisdiction.

FINCEN fined Capital One $390 million in January 2021 for anti-money laundering control violations involving a small portfolio of check-cashing businesses that it had acquired around 2008 and later sold off in 2014. Later, Capital One acknowledged that it had neglected to submit thousands of reports of suspicious activity as well as currency transaction reports for about 50,000 reportable cash transactions totaling about $16 billion. FINCEN fined Capital One $390 million in January 2021 for anti-money laundering control violations involving a small portfolio of check-cashing businesses that it had acquired around 2008 and later sold off in 2014. Later, Capital One acknowledged that it had neglected to submit thousands of reports of suspicious activity as well as currency transaction reports for about 50,000 reportable cash transactions totaling about $16 billion.

Conclusion

For a company that started solely as a credit card division, Capital One has really risen through ranks and gone through so many changes and innovation to become the company it is today. As the company has over 700 branches worldwide.