2nd UPDATE: Fed Sets Meetings On Capital One Plan To Buy ING Direct USA

The U.S. Federal Reserve said Friday that it will hold three public meetings on Capital One Financial Corp.'s (COF) plan to buy ING Groep NV's (ING, INGA.AE) U.S. online-banking business, ING Direct USA.

In addition, the Fed said it has extended the period for public comment on the proposal through Wednesday, Oct. 12.

The Fed announcement comes as some consumer advocates, ING customers and at least one U.S. lawmaker have voiced concern about the deal.

The three meetings, set to help the Fed collect more information on the proposal, will be held in Washington, D.C., Chicago, and San Francisco.

The Fed, in a notice late Friday, said it wants to understand whether the acquisition will produce benefits to the public such as increased competition. It said it also wants to weigh any benefits against any possible adverse effects, such as unsound banking practices or risk to the U.S. financial system.

Some ING customers have voiced concern about the deal on ING Direct's Facebook page.

"Why do good things have to disappear? They get swallowed up by giants. That stinks," reads a June comment, one of almost 600 comments responding to a link to ING's June 16 announcement of the acquisition.

Consumer advocates and Rep. Barney Frank (D., Mass) have urged the Fed to slow down or reject the acquisition. In a letter sent Aug. 17 to Fed Chairman Ben Bernanke, Frank, the top Democrat on the House Financial Services Committee, said "care should be taken to thoroughly examine the impact this purchase with respect to the consolidation of banking assets, the provision of credit by the resulting back" and compliance with a federal law mandating investment in low-income neighborhoods.

In an interview Friday, John Taylor, chief executive of the Washington-based National Community Reinvestment Coalition, said allowing Capital One to purchase the ING online banking business would increase the risks to the financial system by creating a larger financial institution that could threaten the health of the financial system. He argued that regulators should block the merger, or at least put conditions on it that requires Capital One to invest in local communities.

"This is a credit card company acquiring banks so it can do more credit-card lending," he said.

The Washington, D.C., meeting will be held Tuesday, Sept. 20. The Chicago meeting is set for Tuesday, Sept. 27, and the San Francisco meeting is slated for Wednesday, Oct. 5.

"The Federal Reserve's review also includes an evaluation of the financial and managerial resources of the acquiring firm," the Fed said.

Capital One, currently the ninth-largest bank in the U.S. by deposits, is set to pay $9 billion for ING Direct USA--$6.2 billion in cash and $2.8 billion in stock. The McLean, Va., bank has also announced plans to buy the U.S. credit-card business of HSBC Holdings PLC for about $2.6 billion.

Capital One, in a statement, said it respects the Fed's decision to extend the comment period and hold hearings.

"We believe that the benefits of this transaction to our customers, communities and the economy will be significant, and we look forward to telling our story," the company said in a statement. It added that it will remain "a traditional bank" with only 1.5% of deposits nationwide and none of the complexity that the Dodd-Frank reform bill addressed in ending "too big to fail."

The company also said that in its prior acquisitions, it has substantially increased its investments that serve lower-income communities.

"The record includes scores of letters of support from community groups attesting to this fact," said Capital One, adding that it is "adding thousands of jobs to the economy at a time when many financial services companies are announcing sizable reductions."

-By Maya Jackson Randall, Dow Jones Newswires; 202-862-6687, [e-mail]

--Alan Zibel and Matthias Rieker contributed to this report.