State Attorney General Goes After Capital One for Debt Collection and Re-Aging
Capital One is the target of a complaint filed by the West Virginia attorney general. The AG alleges that Cap One solicited customers with charged-off accounts to re-age the debt.
West Virginia Attorney General Darrell McGraw announced Friday that his office has sued credit card issuer Capital One and a debt collection agency for “unconscionable conduct in connection with their credit card lending and collection practices.”
The complaint alleges that Capital One Bank, a subsidiary of Capital One Financial Corp. (NYSE: COF), tricked consumers into payment plans by sending them solicitations disguised as offers of new credit. The arrangement allowed Cap One to re-age the debt so that it did not fall under the statute of limitations.
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The offer was sent to consumers who had charged-off accounts with Capital One or other creditors. Under the terms of the offer, Capital One agreed to provide the consumer $1 of new credit in exchange for the consumer’s agreeing to transfer the entire account balance of a charged-off account to the new credit card account.
“Capital One’s practice of offering nominal extension of credit, if and only if the consumer agreed to pay off a debt too old to be sued on is tantamount to loan sharking,” McGraw said in a statement.
The complaint also alleges that Capital One issued multiple low-limit credit cards, each charging exorbitant fees, rather than raising credit limits on consumers’ existing accounts. Also that Capital One “unconscionably” imposed over-the-limit fees on consumers’ accounts, sold services to consumers who could not benefit from the services and billed and attempted to collect for credit card accounts that were never activated.
Attorney General McGraw’s complaint names a collection agency, COSI Receivables Management, but does not say how the company was involved and how or if it was at fault. Also named in the complaint are three collection and recovery units of Capital One.
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Comments
Comment from DONALD DALY on January 25, 2010 at 1:39PM EST
"TECHNICALITIES". "CREATIVE COLLECTING". If a consumer pulled anything like this, heaven forbid, no one would even notice. It appears that these consumers who were "victimized" the first time around had no qualms about jumping all over the offer of something for nothing, again. No one would condone this action but if it had worked........???
Comment from cjm608 on January 25, 2010 at 8:03PM EST
cap one got caught. i would clean your act up people. its going to be a blood bath.
Comment from -K on January 25, 2010 at 11:59PM EST
In order for the West Virginia AG's version of events to be true, that consumers were "tricked" into re-aging, then I guess he is admitting that his state's residents who were involved in this had no intention of paying their bills.
Comment from RTS on January 26, 2010 at 2:52PM EST
THE DEBTOR IS ALWAYS THE VICTIM NO MATTER WHAT, BUNCH OF CRY BABIES
Comment from Anonymous on January 26, 2010 at 5:27PM EST
Credit card companies are going to make money. Everytime Washington comes up with a way to "save" the consumer, the banks come up with a new way to penalize the consumer. People live beyond their means and others are capitalizing on it.
Comment from Lurker on January 27, 2010 at 6:12PM EST
I would assume that if SOL expired without them paying, then you're right, they didn't intend to pay the bill.
Comment from rfink13 on January 28, 2010 at 10:15AM EST
Put me on the jury. I thought I'd never see the day that I agreed with cap one.
Stupid people shouldn't breed! That would solve a lot of the world's problems.
Comment from KiloDeltaNovember on February 1, 2010 at 10:23AM EST
It truly isn’t re-aging debt if the OLD debt is paid with a NEW line of credit. I believe most in the industry refer to this process as a “balance transfer”. The only criticism I have of this process is that the timing and the procedural separation of the two separate transactions (application and approval of a new line of credit and the payment of the old defaulted line of credit) is both too short and confusingly intertwined.
If there was a slowdown in the entire process (something we don’t often practice in the collections and recovery industry) wherein the new line would be opened first (with a hold period before the new line could be used or a credit limit equal to the account application fee and annual card charges), then that set of fees paid, and then allowing the balance transfer to occur (under separate agreement which would include an increase to the existing card’s credit line commensurate with the ratios tied into the balance transfer).
Divide the process into clearly disunited activities that the Consumer/Debtor agrees to, performs according to, and will most certainly be bound to, there would be, in my opinion, no room for allegations of “unconscionable conduct in connection with their credit card lending and collection practices”.