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Capital One Says ING Direct Won't Change With Purchase

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Capital One said it won't change a thing for customers at much-beloved ING Direct, responding to consumer groups worried that its acquisition of the online bank would translate into new and higher fees.

The Federal Reserve approved the deal on Tuesday, nearly a year after Capital One bid to buy ING Direct for $9.2 billion.

When the acquisition is finalized later this week, Capital One will become the fifth-largest consumer bank by deposit size, controlling more than $200 billion.

"A concern from the beginning was that ING would go away and the bank that people liked as an Internet bank would be replaced by fees and other bad consumer practices" from Capital One, said Alan Fischer, executive director of the California Reinvestment Coalition, one of the consumer groups outspoken about the deal.

A Capital One spokeswoman said in an email Wednesday that the bank will not change policies at ING. "Account servicing and functionality will remain the same," said spokeswoman Amanda Landers. "Customers will still enjoy the competitive rates, no fees and the same experience they've come to know and love from ING Direct."

Many ING Direct customers reacted with outrage when the deal was announced. But some now see the acquisition as boon for the online-only bank because it will provide a brick-and-mortar presence. "Part of my hesitation in becoming 100 percent online is that I wouldn't have a branch to go to, but I felt comfortable with this," said Willy Staley, 26, a contributing writer at bank review website MyBankTracker.com. Staley said he is in the process of switching from Bank of America to ING Direct, but has not closed his old account because he felt unsure about an all-online banking experience.

ING Direct, a Netherlands-based institution that debuted in 2000 in the U.S., pays relatively high interest rates on deposits and charges low fees for its Electric Orange account. The account has no ATM fees, no monthly maintenance fee and no overdraft fees, offering an overdraft line of credit with an 11.25 percent interest rate. Capital One basic rewards checking has a monthly fee of $8.95, ATM fees and an overdraft fee of $35.

Consumer groups stepped up scrutiny of Capital One's business model after the deal was announced. The bank, which started as a credit card company 1988, still relies heavily on profits from its credit card business. Since 2005, Capital One has moved increasingly into consumer banking by purchasing smaller banks, and today heavily markets its high-interest savings accounts and rewards checking accounts. Credit cards still represent 28 percent of the bank's total assets, according to figures published in the Fed's order on Tuesday.

Consumers have criticized Capital One's overdraft fees and policies, including automatically enrolling customers in an overdraft protection program.

The bank, like other big banks, has since complied with regulations that makes overdraft protection optional for customers and has a limit on the number of overdraft fees that can be charged per day. Even so, Capital One's $35 overdraft fee tops the national median of $27.50.

More than half of the complaints to the Federal Reserve during the process leading to ING Direct's purchase were about Capital One's practices for mortgages, small business and consumer lending, and collections. In the past, Capital One has been accused of attempting to wrongly collect money from people who had declared bankruptcy and failing to comply with regulations for auto repossession, the Fed said. The bank settled several class-action lawsuits regarding its car repossession practices prior to 2008.

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