Walmart wants to end its credit card relationship with Capital One Financial in McLean, Va.
Capital One disclosed in a regulatory filing that the giant retailer filed a lawsuit in the Southern District of New York in an effort to terminate their private label and cobranded card programs.
The lawsuit, filed on April 7, came a day after Walmart sent Capital One a notice of termination.
Capital One said it disputes Walmart’s right to terminate the $8.3 billion card program mid-stream, adding that it will “vigorously defend” its contractual rights in court.
Walmart claims in its lawsuit that Capital One “was consistently unable to meet” customer service standards. The retailer claims that the contract allows it to end the agreement if Capital One falls short on critical service standards five times in a year.
Capital One disclosed in its regulatory filing that the loan-loss allowance for the Walmart card portfolio is $314 million – an amount kept low because of the loss-sharing agreement with the retailer.
The card program produced about $214 million in after-tax net income in 2022.
Capital One said that, if Walmart prevails, the portfolio would likely switch to a new issuer no later than January 2025. The agreement also requires Walmart or a new issuer to pay Capital One a purchase price equal to par for the private label accounts and equal to fair market value for the co-branded accounts.