NEW YORK (AP) A significant milestone has been achieved in the financial sector as the proposed merger between Capital One and Discover Financial Services has received crucial approval from multiple regulatory bodies. This approval, granted on Friday, paves the way for the $35 billion agreement to progress towards its completion.

The Federal Reserve and the Office of the Comptroller of the Currency (OCC) have both signed off on the deal, which was initially announced back in February 2024. This merger is poised to reshape the landscape of the credit card industry, combining two influential players in the financial market.

In a related development, the Federal Reserve Board has entered into a consent order with Discover, imposing a hefty fine of $100 million on the company for overcharging certain interchange fees from 2007 through 2023. These fees had drawn scrutiny and concern from regulators, leading to the current actions. Discover has already taken steps to rectify this situation by terminating the disputed practices and pledging to reimburse affected customers, as confirmed by the Federal Reserve. This regulatory action has been coordinated with the Federal Deposit Insurance Corporation (FDIC), ensuring a comprehensive approach to the matter.

In light of these developments, Capital One has made a commitment to adhere to the Federal Reserve Board's directives concerning its new partner, Discover, based in Riverwoods, Illinois. This commitment includes fulfilling the remediation requirements set forth by the Board as a prerequisite for the merger's approval.

The OCC, in its statement regarding the merger, emphasized that its approval was based on a thorough analysis of how the merger would impact communities, the banking industry, and the overall U.S. financial system. Such evaluations are vital in ensuring that the interests of consumers and the stability of the financial ecosystem are safeguarded.

Capital One, which operates out of McLean, Virginia, has expressed optimism about finalizing the acquisition by May 18, now that all necessary regulatory approvals have been secured. Shareholders from both companies had previously endorsed the merger in February, signaling strong support for this strategic move.

This merger not only consolidates two of the largest credit card companies outside of traditional banks in contrast to giants like JPMorgan Chase and Citigroup but also aligns their customer bases, which primarily consist of Americans interested in cash-back incentives or modest travel rewards. This is in stark contrast to the premium offerings that dominate the portfolios of American Express, Citigroup, and Chase.

Moreover, this partnership is expected to bolster Discover's payment network, providing it with a robust credit card partner. This collaboration could enable Discover to enhance its competitive position within the U.S. credit card industry, which is currently dominated by the Visa-Mastercard duopoly. In this competitive landscape, American Express holds a distant third position, while Discover has found itself lagging even further behind.