Capital One’s $35 billion plan to buy fellow US credit card issuer Discover has been criticised as “dangerous, illegal” by a coalition of advocacy groups who have said that the deal “must be stopped”.

In a letter to the US Federal Reserve and Department of Justice seen by The Guardian, more than a dozen advocacy groups have called on the deal to be curtailed. It warns that combining two of the country’s largest credit companies would “further concentrate risk” and damage competition.

The letter is addressed to Federal Reserve chair, Jerome Powell; Federal Deposit Insurance Corp (FDIC) chair Martin Gruenberg; acting comptroller of the currency Michael Hsu; and assistant attorney general at the US Department of Justice Jonathan Kanter.

It also warns that giving Capital One a relative monopoly would allow it to increase fees after closing the acquisition.

Capital One, which anticipates closing the deal in late 2024 to early 2025 subject to regulatory and shareholder approvals, is a major issuer of Visa and MasterCard credit cards in the US. Discover meanwhile has more than 300 million global cardholders and is one of the largest card payment networks in the US.

Signatories to the letter include the American Economic Liberties Project, Public Citizen and Americans for Financial Reform.

It states: “The scale and scope of harms represented by this transaction are enormous. The threat is grave, not just to the dynamism of the economy and the stability and competitiveness of the financial services sector, but to American businesses and the health of consumers across the country.”

The letter continues that the regulators should “deny this merger”, and that “if bank regulators do not reject this merger, we urge the justice department to sue to block the deal.”

In a separate statement, Jesse Van Tol, president and chief exec of National Community Reinvestment Coalition, said: “Capital One is a notorious bad actor, even at its current size, and should not be allowed to further concentrate market power.”

For its part, a Capital One spokesperson told the news outlet that its “long history” of serving customers is testament to the deal’s validity. They said: “As this process moves forward, we are fully committed to engaging with consumer organisations and other stakeholders to demonstrate the significant benefits of this transaction to consumers, communities, and competition in the marketplace.”

The Biden administration has taken an aggressive stance on antitrust and competition issues, but this particular merger could be complicated by a potential change in administration later this year following November’s presidential election. During his previous term, former president Trump took a notoriously pro-business stance and abolished many consumer and environmental rights.

Last month, Democrat senator Elizabeth Warren and 11 other lawmakers called on regulators to block the deal, stating that “this merger is bad for consumers…. In addition to harming consumers and small businesses, bank consolidation poses increased systemic risk in the financial system.”

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