Item 7.01 Regulation FD Disclosure.
On April 6, 2023, Capital One, National Association, a subsidiary of Capital One
Financial Corporation ("Capital One" or the "Company"), received from Walmart a
notice of termination of the credit card partnership agreement (the "CCPA")
under which Capital One is the exclusive issuer of Walmart's private label and
co-branded credit card program in the U.S. (the "Card Program"). On April 7,
2023, Walmart filed a lawsuit in the Southern District of New York seeking a
declaratory judgment that it has the contractual right to terminate the Card
Program early. Capital One disputes that Walmart has any right to terminate the
Card Program mid-stream and will vigorously defend our contractual rights in
court.
As of December 31, 2022, the Card Program consisted of approximately $8.3
billion in ending outstanding loan balances and the allowance for credit losses
related to the Card Program portfolio was approximately $314 million. The
allowance for credit losses as well as the capital we hold against the Card
Program portfolio are lower than they would be otherwise due to the loss sharing
arrangement agreed to as part of the Card Program. For the year ended December
31, 2022, the Card Program produced approximately $214 million in net income
after taxes. Any future financial impacts will depend on the timing and final
resolution of this matter, including the related litigation, and future
management actions.
If a court finds that Walmart is permitted to terminate the Card Program early,
we would expect the resulting transfer of the card portfolio to a new issuer to
occur no earlier than January 2025. The CCPA also requires that Walmart or one
or more new issuers pay to Capital One a purchase price that is equal to par for
the private label accounts, and equal to fair market value for the co-branded
accounts, in each case, that are part of the Card Program. Capital One is
entitled under the CCPA to retain any premium above 1.5% of the par value of the
co-branded accounts upon sale.
Cautionary Statements Regarding Forward-Looking Statements.
The information provided in this Form 8-K contains forward-looking statements,
which involve a number of risks and uncertainties. The Company cautions readers
that any forward-looking information is not a guarantee of future performance
and that actual results could differ materially from those contained in the
forward-looking information due to a number of factors, including those listed
from time to time in reports that the Company files with the Securities and
Exchange Commission, including, but not limited to, the Annual Report on Form
10-K for the year ended December 31, 2022. Forward-looking statements speak only
as of the date made. We do not undertake any obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise, except as may be required under applicable securities laws.
Note: Information in this report furnished pursuant to Item 7.01 shall not be
deemed to be "filed" for the purposes of Section 18 of the Securities Exchange
Act of 1934 or otherwise subject to the liabilities of that Section. This report
will not be deemed an admission as to the materiality of any information in the
report that is required to be disclosed solely by Regulation FD. Furthermore,
the information provided in this Form 8-K shall not be deemed incorporated by
reference into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. Description
104 The cover page from this Current Report on Form 8-K, formatted in Inline XBRL
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