WASHINGTON (Reuters) - Capital One will commit $265 billion over five years to lending, philanthropy and investment if its takeover of Discover Financial Services ( DFS ) goes through, the bank said on Wednesday, as it aims to appease critics and win over regulators. 

Under a plan agreed upon with four community groups, Capital One has promised to maintain the combined entity's lending to low-and-moderate income (LMI) consumers and communities at $200 billion over five years. It will retain Discover's sole branch in Delaware and will not close any branches as a result of the deal. Capital One will also maintain 30% of branches and cafes in LMI neighborhoods, and has promised no front-line staff cuts.

The McLean, Virginia-based Capital One has also committed over $35 billion to support affordable housing for LMI communities and individuals, a 30% increase over what the banks had previously planned, among other small business lending, product and education pledges. 

Unveiled in February, Capital One's $35 billion Discover deal will create the biggest U.S. credit card issuer by balances and the sixth-largest bank by assets. It will also give Capital One control of Discover's card payment network, the fourth major payment network operator after Visa, Mastercard and American Express.

Some influential community groups oppose the tie-up between the two major U.S. consumer credit card lenders, fearing it will reduce services and increase costs for Americans. Proponents argue it could boost payments competition.

Capital One's community benefits plan, which has not previously been reported, is more than twice as big as any such plan to date, according to data from the National Community Reinvestment Coalition (NCRC), a network of nonprofits.

It could help assuage critics and make the deal more palatable to the Federal Reserve and Office of the Comptroller of the Currency (OCC), which are under political pressure to be tough on mergers. The agencies are holding a public meeting to discuss the transaction on Friday. 

"I think the OCC and the Fed care deeply about this plan and the ways in which we will positively impact the community. They see this as akin to competition, financial stability and the other factors that they look at," Andres Navarrete, Capital One's head of external affairs, told Reuters in an interview.

The plan also includes $600 million for community development financial institutions, sixfold what the two banks had previously planned, and will boost planned philanthropic giving by 29% to $575 million.

'ESSENTIAL NEEDS'

Community groups have increasingly pushed for acquiring banks to commit to community benefits plans, arguing that consolidation since the 2007-2009 financial crisis has reduced Americans' access to affordable financial services. 

While the Fed and OCC do not require such plans, the law says they must scrutinize the convenience and needs of affected communities, and the agencies consider commitments to maintain or expand services, said Chip MacDonald, an M&A lawyer and managing director at MacDonald Partners.

Skeptics, though, say the plans often lack transparency, are not legally enforceable, and are difficult to measure.

"You don't know what the bank was already planning on doing so it's not clear what the additional commitment is," said Jeremy Kress, a University of Michigan professor.

Capital One said it will report its progress to the Fed and OCC annually and regularly update its Community Advisory Council.

The $100 billion community benefits plan US Bancorp agreed with the NCRC in 2022 to clinch its MUFG Union Bank takeover had been the largest previous plan, according to the NCRC which has negotiated all national benefit plans.

The group has been a vocal critic of Capital One, saying the bank did not honor a $28.5 billion commitment to mortgages and home lending made when acquiring ING Direct USA in 2012.

Capital One withdrew from that business in 2017. The NCRC has argued that home loans are an important component of benefits plans because they help build wealth. 

"We made significant investments in building a mortgage business over the years, but ultimately couldn't make it work," said Navarrete. The bank said it exceeded all its other commitments.

Navarrete said that credit card and auto lending, which constitute Wednesday's $200 billion LMI lending figure, are also key products that help consumers meet essential needs and build credit history.

In an unusual move, Capital One bypassed the NCRC to agree Wednesday's plan with four community groups, including the National Association for Latino Community Asset Builders (NALCAB), which together represent around 800 nonprofits.

NALCAB CEO Marla Bilonick said she believed the plan was very generous and that Capital One's public commitment was "important because it gives accountability."