American retailer Walmart filed a lawsuit against its credit card partner Capital One in an attempt to renegotiate the terms of the already existing deal or to end the deal earlier. Capital One has been in a partnership with Walmart for the past four years.
Now Walmart wants to make changes in the terms of the contract such as the loss-sharing agreement on chargebacks. The retailer also wants to include its own fintech arm in credit card issuing.
The lawsuit was filed last week on Friday by Walmart in the U.S. District Court for the Southern District of New York. In the court filing, Walmart has requested a judicial declaration citing the company’s right to terminate the existing contract that partners it with Capital One.
The partnership also gives the latter the exclusive right to issue the retailer’s private label and co-branded credit cards. Just before the day of the court filing Walmart did send a termination notice to Capital One. The details about this were provided in the same court document that Walmart filed.
Capital One has filed a filing to the United States Securities and Exchanges Commission (U.S. SEC) in which it disapproved the Walmart argument that said it had the right to terminate the agreement. The presence of the termination notice just the day before the court filing was also mentioned by Capital One.
The credit card company mentioned this in a filing it made to the U.S. SEC. Capital One is an American Corporation specializing in issuing and managing credit cards, auto loans, banking, savings accounts, and more.
Walmart has announced that the company was focusing on bringing its customers a new credit card option. This option will provide the customers with meaningful benefits and rewards. The retailer giant added that in the meantime the cardholders would not experience any disruptions in any of the provided services.
It added that the cardholders could continue to use their existing Capital One Walmart credit cards for the time being. The retail corporation accused Capital One that it did not satisfy the standards related to the timely processing and transaction posting.
Walmart appointed a spokesperson to provide the details of the filming. As per this spokesperson Walmart has filed the lawsuit because the company was not satisfied with the way the credit card issuer has been proceeding with the deal.
The company has also highlighted that the credit card partner failures to fulfill some of the customer service standards included in the agreement. The number of times the credit card combat failed to meet the customer service standards was also known by the spokesperson.
Capital One came behind a total of more than five times during a twelve-month period. Walmart pressed this and stood firm in its arguments that this makes it eligible to break off the existing partnership.
Capital One had also appointed a spokesperson to speak about the company’s part in the issue. According to the spokesperson it was known that Walmart was trying to end the deal because Capital One did not agree with the former’s demand to renegotiate the terms and conditions of the existing deal.
The spokesperson said that Capital One has developed a top-level credit card product for Walmart and its customers. And that no one can say that the product was not of quality and the company was proud of the value that the product has been of to both Walmart and to its customers.
After this, the spokesperson said that the entire lawsuit was an attempt to make modifications to the now-existing economic terms of the partnership that both parties had agreed on just a few years ago. If the company did not agree to the renegotiations then Walmart would proceed to end the deal altogether.
Capital One views that the issue of the customer service cited by Walmart was immaterial and cured by the former pursuing the terms and conditions of the agreement without causing any harm to the customers, to the program, or even to Walmart.
The spokesperson said that the company disputes that Walmart has any right to change the terms of the still-running partnership right in the middle of it. And that Capital One will fight in court to protect its contractual rights.
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What Is Walmart Credit Card?
Walmart signed the deal with Capital One back in July 2018 and it was announced shortly after. The program was launched almost after a year. The deal is valid till 2026.
At the end of the year, 2022, Walmart’s credit card agreement had risen to around 214 million US dollars in post-tax net income. This was reported on December 31, 2022. In the following January, Capital One reported that it had an overall net income of 7.04 billion US dollars available to the common stockholders.
It is not possible to predict how the lawsuit will turn out. Let’s have a look at the possibilities. One, Walmart will win the case, which will cause it to end the deal with Capital One and the currently issued credit cards will be invalid.
Two, Walmart will lose the case, and everything will remain until 2026, which is when the deal expires. Three, the two companies will come to a middle ground, which will result in some changes happening in credit card dealings.
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