Dive Brief:

• Walmart is suing Capital One in an attempt to end its credit-card contract with the bank.
• The retailer said the McLean, Virginia-based bank has repeatedly failed to meet a number of contractual obligations in its card partnership deal, according to a lawsuit filed Friday in the U.S. District Court for the Southern District of New York.
• Capital One “was consistently unable to meet the customer-service standards” outlined in its contract, such as issuing replacement cards and promptly processing payments and posting transactions, Walmart alleged in the suit.

Dive Insight:

Capital One failed to meet customer care standards in five “critical” categories over a 12-month rolling period, the lawsuit alleged. 

The bank, in February, admitted in writing that it failed to meet the standards, Walmart alleged.

In a statement to Banking Dive, a Capital One spokesperson called Walmart’s lawsuit “an attempt to renegotiate the economic terms of the partnership it agreed to just a few years ago, or end the deal early.”

“These immaterial servicing issues were cured by Capital One pursuant to the terms of the agreement, without harm to customers, the program, or Walmart,” the spokesperson said.

Capital One disputes that Walmart has the right to change the terms of the existing partnership, the spokesperson said, adding the bank will “vigorously protect our contractual rights in court.”

Capital One partnered with Walmart to issue the retailer’s credit cards in 2018. That deal runs until at least 2026, according to The Wall Street Journal. 

The retailer recently told Capital One executives it wanted to renegotiate certain terms of the card contract, which included adjusting the loss-sharing agreement, sources told The Journal.  

Walmart also told the bank it wanted its fintech unit to be involved in issuing cards, the sources said.

The retailer is beta-testing a banking platform, called One, with employees and intends to eventually offer the service to customers. 

Capital One, however, wasn’t willing to comply with Walmart’s requests, The Journal reported.

The Bentonville, Arkansas-based retailer said it plans to offer a new credit-card option soon, according to Bloomberg.

Existing cardholders won’t experience disruptions in service and can continue to use their Capital One Walmart credit cards, a Walmart spokesperson told the wire service.