The world’s largest retailer has cutoff ties with Capital One – its credit card issuer, accusing it of incompetent work environment with a lawsuit that began in April 2023.
The five year long partnership between Capital One Financial Corporation and Walmart Incorporation has finally come to an end after years of bickering feud. The world’s largest retailer has previously accused Capital One, which was the exclusive issuer of Walmart consumer credit cards, of being too slow to post many transactions to cardholders’ accounts, and failing to promptly replace many lost cards.
Walmart had tied up with Capital One in 2018 after ending its two-decade long partnership with Synchrony Financial. Capital One started issuing the store-branded credit cards from 2019. Headquartered in McLean, Virginia, Capital One is a financial holding company, operating on providing financial services to its customer base – credit cards, auto loans, banking, and savings account. As of the end of FY2023, Capital One has recorded $351 billion in deposits and $481.7 billion in total assets.
The news of this partnership dissolution will have no impact on the cardholders who can continue to earn and redeem rewards on purchases as they currently do. Capital One has confirmed that it will maintain ownership and continue servicing the accounts, and cardholders will be updated with new information in the upcoming months, the company said on Friday.
In a government filing on Friday, Capital One said there are approximately $8.5 billion in loans in the existing Walmart credit card portfolio. It is not declared by Walmart who it might name a new banking partner. The Associated Press sent an email message seeking comment from Walmart on Saturday. Separately, Capital One has agreed earlier in the year to buy credit card issuer Discover Financial Services in a $35.3 billion all-stock deal to create a global payments giant.
Legal Battle over Customer Credit Card violations
Walmart dissatisfied over Capital One’s lack of customer service initiative prompted a lawsuit that began in April 2023. Walmart said it could end the partnership with Capital One if it fails to meet any of 13 “critical” customer service standards at least five times in a 12-month period.
Based in Bentonville, Arkansas, Walmart is the world’s leading retailer, operating over 10,500 offline stores and various Ecommerce website across 19 countries. The company reported revenue of $648 billion in the fiscal year 2024 and employs about 2.1 million associates globally.
In the lawsuit, the company accused Capital One on performative basis, failing to achieve customer satisfaction by neglecting core business duties. The problems were first uncovered in the late 2022, and early 2023. Capital One said it disagreed with Walmart’s interpretation of its business model and said it was evaluating its right to appeal.
Capital One going behind Walmart’s “13-term violation” projection, said the retailer could invoke that right only if it failed any single critical standard at least five times. The US District Judge Katherine Polk Failla in Manhattan said “Capital One’s interpretation would leave Walmart powerless even if the bank failed all 13 customer service standards four times a year – 52 failures in all – for 10 years.”
Thereby, “terms of a 2018 agreement making Capital One the exclusive issuer of Walmart-branded credit cards in the United States “clearly dictate” that Capital One’s repeated customer service failures entitled Walmart to end their relationship”, said the US District Judge. The federal judge ruled in March 2024 that Walmart can end its credit card partnership with Capital One early because the bank failed to provide required level of customer service.
