January 26, 2010
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News: WV Sue's Capital One
Capital One, one of the nation's largest credit card companies, recently posted a significant increase in profits for fourth quarter 2009. It appears there are those that believe the company achieved their success though "unconscionable conduct in connection with their credit card lending and collection processes." Darrell McGraw, West Virginia's Attorney General has filed a lawsuit against the bank alleging that the bank tricked cardholders into thinking the bank was offering them a new credit offer. A collection agency, COSI Receivables Management was also named in the suit. Court documents do not indicate how the collection agency is related to the case. The Attorney General says that the offer gave Capital One the opportunity to re-age the credit card debt removing it from under the statute of limitations. The offer provided the cardholder with $1 new credit if they transferred a charged off account to a new account.
In a statement, Mr. McGraw said that Capital One's offer for credit based on the cardholder's agreement to transfer write off debt to a new credit card is "tantamount to loan sharking." The suit also says that Capital One issued credit cards to low income subprime customers with credit limits as low as $200 and carrying an annual service fee as high as $59. The bank typically billed the service fee on the month following the account activation lowing the credit limit to $141. Cardholders were often unaware of the reduction in available credit and inadvertently exceeded the limit causing them to face high over-the-limit penalties.
Three additional collection agencies utilized by Capital One were also named in the suit. Additionally, the suit alleged that the bank billed and attempted collection for credit card accounts that had never been activated. Over the past year, McGraw's office has been diligent in pursuing a halt to the victimization of customers by the financial industry. The Attorney General's office filed two lawsuits against such firms in November. Involved in those suits were four collection agencies and a payday lending firm group.