CAPITAL ONE FUNDING, LLC Annual Report - How They Did This Year

I’ve put together this guide to help you understand how Capital One Funding, LLC performed this year. My goal is to turn complex financial filings into plain English so you can decide if this fits your investment goals.

1. What does this company do?

Capital One Funding, LLC acts as a middleman that bundles credit card debt into financial products. These products are sold to investors as bonds through the Capital One Multi-Asset Execution Trust (COMET). You are looking at the legal structure used to package over $60 billion in credit card debt.

2. How the "plumbing" works

Because this entity exists to package debt, its performance depends on the health of the credit card accounts in the Capital One Master Trust.

The latest filing confirms the "plumbing" is working. Everyone responsible for collecting payments from cardholders passed their compliance audits for 2025. The trust also maintains a cash buffer, which is a pool of money designed to absorb losses of up to 20% of the portfolio value before bondholders lose any of their original investment.

3. Major wins and challenges this year

The biggest story remains the ongoing legal battle over "interchange fees"—the fees charged to process transactions.

• The Update: A $5.5 billion settlement was finalized in 2023, but a separate fight over network operations continues. A new settlement proposal arrived in November 2025, with a court hearing set for April 2026. These fees typically make up 1.5% to 2.5% of every transaction, so the outcome of this hearing will provide important clarity for the industry.

4. Financial health

The company’s health is tied to the health of its credit card portfolio. Risk is spread across millions of individual users, meaning no single person or company owes enough money to sink the trust. The "charge-off rate"—the percentage of debt that goes unpaid—stays within the normal range of 3.5% to 4.5%. This indicates that consumer payment behavior remains stable.

5. Key risks

• Legal Uncertainty: The interchange fee lawsuit is the primary factor to watch. Changes in fee regulations could impact the income that protects investors.
• Economic Shifts: The company relies on consistent bill payments. A recession or high unemployment would threaten these investments. If late payments hit 6%, the trust might be forced to pay back investors faster than planned.

6. Future outlook

The company is waiting for the courts to approve the latest transaction fee settlement. Keep an eye on the April 2026 hearing for more clarity. Meanwhile, the trust continues to replace maturing debt, keeping its bond offerings stable and ensuring it can meet its obligations to investors.

Investor Takeaway: If you are considering this as an investment, your primary focus should be on the stability of consumer credit card payments and the outcome of the April 2026 court hearing regarding interchange fees. As long as the charge-off rate stays near its current 3.5%–4.5% range, the underlying "plumbing" of the trust remains in good working order.