The credit card giant Capital One, which has been in the crosshairs of consumer advocates for years, is mired in more lawsuits.
Lawsuit #1:
California Attorney General Jerry Brown has been eyeing Capital One for nearly two years, investigating the company for possible violations of the state's unfair business practices and false advertising laws. In November 2006, Brown first requested "books and records… and interviews with employees" due to "substantial concerns about the credit card practices of Capital One," including solicitations for credit card applications mentioning balance transfers and accounting closing practices.
The attorney general made subsequent requests for information as part of its ongoing investigation – to no avail. Capital One's response? They filed a lawsuit this month claiming that as a national bank, only the U.S. Office of the Comptroller of the Currency can examine its records or take any enforcement actions. Never mind the fact that when Brown made his requests, Capital One was NOT a national bank. In fact, according to Reuters, it wasn't until March 2008 – 18 months after the attorney general made his first request - that Capital One converted its Virginia charter to that of a national banking association.
Lawsuit #2:
Former Capital One cardholder James Krider has filed suit in the U.S. District Court, Central District in downtown Los Angeles, against Capital One and the three major credit bureaus over post-bankruptcy false credit reporting. Seems that Capital One continued to report three credit cards that had been discharged in his bankruptcy filings. After months of disputes, Capital One insisted it had the right to continue to report his discharged accounts as "delinquent" on his credit reports even though the debts had been discharged through the bankruptcy.
According to Krider's attorney, Robert Brennan (Brennan, Wiener & Assoc.), "a growing number of banks and credit card companies have quietly been 'pushing the envelope' on credit reporting of bankruptcy-discharged debt, hoping to pressure consumers who have recently been through bankruptcy to pay these debts.
"I admit, I am not proud of having to declare bankruptcy, but the bankruptcy notation on my credit reports is bad enough and that will be there for 10 years," Krider said in a press release issued by his attorney. "Having the credit card companies continue to report my old credit cards as still delinquent is doubly bad and makes it that much tougher for me to get back on my feet."
Krider is seeking money damages as well as a permanent deletion from his credit reports of any delinquent reporting of any accounts included in his bankruptcies.
The case is expected to go to trial in February 2009.
Showing posts with label Capital One. Show all posts
Showing posts with label Capital One. Show all posts
Tuesday, May 13, 2008
Monday, April 21, 2008
Consumers Silenced in Testimony on Unfair Credit Card Practices
On March 13, registered Republican Steven Autry had planned to share his experience with Capital One before the House Financial Services Committee's hearings on H.R. 5244, a proposal to ban unfair and deceptive credit card practices:
Neither Steven nor the other three credit card victims who were invited to testify actually did. Congressman Spencer Bauchus (R-AL) and the credit card companies led the rally to muzzle the consumers by demanding they agree to publicly release all of their private financial records – or not be able to testify. (Bauchus, not surprisingly, has been generously funded by the financial services industry.)
The bully tactic worked. Representatives from Capital One, Chase and Bank of America spoke for hours about how fair and consumer-friendly their practices were, citing "facts" without any supporting data. Yet the consumers who flew in to testify were silenced by the threat of the financial institutions being able to expose anything they wanted about the consumers or smear them after the hearings were over.
Rep. Mark Udall (D-CO) railed on behalf of his constituent Susan Wones, who traveled to D.C. to tell lawmakers about how her credit card company doubled her interest rate to 25 percent without notice and despite her record of paying her bills on time. Susan holds a high credit score rating, pays her bills on time and doesn't exceed her credit card limit.
"None of the consumer witnesses objected to signing releases that would allow the committee to verify the facts concerning their individual stories, and I must say that I found the Financial Services Committee’s insistence on a broad waiver of privacy rights to be both unnecessary and counter-productive," Udall said in a release. "Narrowly drawn waivers could have been drafted by Committee staff weeks ago, instead of waiting until the eleventh hour to prevent consumer testimony. What happened today is emblematic of why so many Americans are fed up with Washington."
Rep. Maloney has promised to hear the voices of these consumers. Time will tell if that does indeed happen.
For now, we have Steven's written testimony, which holds this analogy:
"My relationship with Capital One goes back to 1999, when I was solicited with an offer for a Visa card with a "fixed" 9.9% rate card. I applied over the phone, and was approved. The card was used for both purchases and balance transfers in a positive relationship with Capital One for eight years until July, 2007. That's when Capital One advised me in a billing insert that my "fixed" rate of 9.9% was being raised to 16.9%. No reason or explanation was given – I was not late on payment, and had not utilized the entire credit limit. This was a unilateral change to the terms of our agreement.
"In August, of 2007, I wrote a letter to Mr. Richard D. Fairbank, Chairman, President, and CEO of Capital One, at the McLean, Virginia home office. My written statement will contain a copy of Capital One's response which includes the line, 'Unfortunately, changes in the interest-rate environment or other business circumstances may require us to increase rates, even for fixed-rate accounts in good standing.'"
Neither Steven nor the other three credit card victims who were invited to testify actually did. Congressman Spencer Bauchus (R-AL) and the credit card companies led the rally to muzzle the consumers by demanding they agree to publicly release all of their private financial records – or not be able to testify. (Bauchus, not surprisingly, has been generously funded by the financial services industry.)
The bully tactic worked. Representatives from Capital One, Chase and Bank of America spoke for hours about how fair and consumer-friendly their practices were, citing "facts" without any supporting data. Yet the consumers who flew in to testify were silenced by the threat of the financial institutions being able to expose anything they wanted about the consumers or smear them after the hearings were over.
Rep. Mark Udall (D-CO) railed on behalf of his constituent Susan Wones, who traveled to D.C. to tell lawmakers about how her credit card company doubled her interest rate to 25 percent without notice and despite her record of paying her bills on time. Susan holds a high credit score rating, pays her bills on time and doesn't exceed her credit card limit.
"None of the consumer witnesses objected to signing releases that would allow the committee to verify the facts concerning their individual stories, and I must say that I found the Financial Services Committee’s insistence on a broad waiver of privacy rights to be both unnecessary and counter-productive," Udall said in a release. "Narrowly drawn waivers could have been drafted by Committee staff weeks ago, instead of waiting until the eleventh hour to prevent consumer testimony. What happened today is emblematic of why so many Americans are fed up with Washington."
Rep. Maloney has promised to hear the voices of these consumers. Time will tell if that does indeed happen.
For now, we have Steven's written testimony, which holds this analogy:
"The NFL does not allow one team, in the midst of the fourth quarter, to unilaterally move their end zone 20 yards in their favor just because they don't like the point spread. The rules are laid out before the kickoff, and the umpires enforce the same rules for both home and visiting teams for the whole contest. It's time for legislation at the federal level that tells the credit card industry, 'Game Over' to unilateral, one-sided, rule changes."
Tuesday, February 12, 2008
CapOne and BOA Credit Card Ripoff
If you have a Capital One or Bank of America credit card, you may be in for a surprise when your monthly bill arrives.
Hundreds of thousands of credit card holders - many of whom have never missed a credit card payment and were in good standing - have been informed that their interest rates will be doubled - some to as much as 28 percent - without any explanation of the increase.
The big banks have been sending notices to consumers advising them of this change over the past month. In fine print, Bank of America has offered customers the option of not using their cards any longer and paying off their existing debt at the current interest rate - but in order to take advantage of this option, customers must "opt out" of the change by writing to Bank of America. There is no opt-out telephone number, nor does Bank of America provide a form or a return envelope. And consumers don't have much time to respond. Letters received in late January had deadline dates of Feb. 19 or Feb. 29. Those who threw away the notice thinking it was junk mail or who fail to respond by the due dates will see their rates automatically rise on existing and new balances.
It's a legal - but sneaky - trick, as many of the big credit card issuers have provisions in the fine print that they can raise rates for any reason at any time. And with losses piling up in the subprime mortgage sector and increasing credit card chargeoffs, it's an easy way for banks to generate revenue.
But most people don't have a secret stockpile of money laying around that they can use to pay off their credit card balances - which means that once again, the credit card companies will win big at their customers' expense.
All this is happening despite the continued cuts in the Federal funds rate, which influences the interest that consumers pay for credit cards, home equity lines and car loans. The rate was reduced this year by 1.25 percentage points and currently stands at 3 percent.
Look for continued legislative efforts this year by Congress to curb these unfriendly practices.
Hundreds of thousands of credit card holders - many of whom have never missed a credit card payment and were in good standing - have been informed that their interest rates will be doubled - some to as much as 28 percent - without any explanation of the increase.
The big banks have been sending notices to consumers advising them of this change over the past month. In fine print, Bank of America has offered customers the option of not using their cards any longer and paying off their existing debt at the current interest rate - but in order to take advantage of this option, customers must "opt out" of the change by writing to Bank of America. There is no opt-out telephone number, nor does Bank of America provide a form or a return envelope. And consumers don't have much time to respond. Letters received in late January had deadline dates of Feb. 19 or Feb. 29. Those who threw away the notice thinking it was junk mail or who fail to respond by the due dates will see their rates automatically rise on existing and new balances.
It's a legal - but sneaky - trick, as many of the big credit card issuers have provisions in the fine print that they can raise rates for any reason at any time. And with losses piling up in the subprime mortgage sector and increasing credit card chargeoffs, it's an easy way for banks to generate revenue.
But most people don't have a secret stockpile of money laying around that they can use to pay off their credit card balances - which means that once again, the credit card companies will win big at their customers' expense.
All this is happening despite the continued cuts in the Federal funds rate, which influences the interest that consumers pay for credit cards, home equity lines and car loans. The rate was reduced this year by 1.25 percentage points and currently stands at 3 percent.
Look for continued legislative efforts this year by Congress to curb these unfriendly practices.
Thursday, December 27, 2007
It's Good to Have Limits
A couple of years ago, Federal Reserve researchers reviewed 310,000 individual consumer credit files. Among their findings: nearly half (46%) were missing at least one credit limit on their report.
For anyone who is concerned about improving or maintaining their credit score, this is bad news... because when companies like Capital One do not report credit limits to the credit reporting agencies (Equifax, Experian and TransUnion), your credit score can drop significantly.
The first question: How does this happen?
Part of your credit score -- 30% -- is determined by how you use your credit. If you tend to maintain balances at or close to your credit limit, your score will not be as high.
Credit reporting agencies use special software to calculate your credit utilization ratios. Credit utilization refers to how much of your available credit you are using. If a company does NOT report your card limit, the software may substitute your highest balance in place of your actual limit to calculate your ratio.
So, for example, if you have a credit card with a $5,000 credit limit, and the highest monthly balance you've ever had on the card is $2,500, you have a 50% utilization ratio. However, if your most recent balance is $2,000, and the credit card company doesn't report your $5,000 limit, the scoring software may use the highest monthly balance ($2,500) to determine your limit. That would make it appear as though you are nearly maxxed out with a credit utilization ratio of 80% - which could drop your score 20 to 50 points or more.
Recent data from Experian revealed that those with the highest credit scores used only, on average, 17.8% of their available credit.
The next question - Why do companies withhold credit limits?
The answer: Competition and the almighty dollar.
With the average American carrying four credit cards with balances of $9,000-$13,000, it's becoming increasingly difficult for lenders to gain new customers. As a result, they are trying to lure existing cardholders with offers of low balance transfers, cash rebates and more.
Companies like Capital One hope to reduce "poaching" of customers by their competitors, who routinely sift through national credit bureau data looking for prospective customers. The practice of withholding credit limits artificially lowers the credit scores of their customers, theoretically making them less attractive to other lenders. And it might mean that consumers using Capital One cards are paying higher interest rates on their other credit accounts. This makes it more likely that you will remain a captive customer of Capital One and less likely to be offered the credit you deserve from other companies.
Those hurt the most by this practice are consumers with few credit accounts and those just beginning to build their credit history.
Class action lawsuits have been initiated, accusing the Big Three of deliberately shielding data despite knowing that this practice reflects negatively on credit score calculations.
Until the lawsuit is settled, consumers would be wise to review their credit files to see which companies are not reporting accurate credit limit data, and to be cautious about using these cards.
For anyone who is concerned about improving or maintaining their credit score, this is bad news... because when companies like Capital One do not report credit limits to the credit reporting agencies (Equifax, Experian and TransUnion), your credit score can drop significantly.
The first question: How does this happen?
Part of your credit score -- 30% -- is determined by how you use your credit. If you tend to maintain balances at or close to your credit limit, your score will not be as high.
Credit reporting agencies use special software to calculate your credit utilization ratios. Credit utilization refers to how much of your available credit you are using. If a company does NOT report your card limit, the software may substitute your highest balance in place of your actual limit to calculate your ratio.
So, for example, if you have a credit card with a $5,000 credit limit, and the highest monthly balance you've ever had on the card is $2,500, you have a 50% utilization ratio. However, if your most recent balance is $2,000, and the credit card company doesn't report your $5,000 limit, the scoring software may use the highest monthly balance ($2,500) to determine your limit. That would make it appear as though you are nearly maxxed out with a credit utilization ratio of 80% - which could drop your score 20 to 50 points or more.
Recent data from Experian revealed that those with the highest credit scores used only, on average, 17.8% of their available credit.
The next question - Why do companies withhold credit limits?
The answer: Competition and the almighty dollar.
With the average American carrying four credit cards with balances of $9,000-$13,000, it's becoming increasingly difficult for lenders to gain new customers. As a result, they are trying to lure existing cardholders with offers of low balance transfers, cash rebates and more.
Companies like Capital One hope to reduce "poaching" of customers by their competitors, who routinely sift through national credit bureau data looking for prospective customers. The practice of withholding credit limits artificially lowers the credit scores of their customers, theoretically making them less attractive to other lenders. And it might mean that consumers using Capital One cards are paying higher interest rates on their other credit accounts. This makes it more likely that you will remain a captive customer of Capital One and less likely to be offered the credit you deserve from other companies.
Those hurt the most by this practice are consumers with few credit accounts and those just beginning to build their credit history.
Class action lawsuits have been initiated, accusing the Big Three of deliberately shielding data despite knowing that this practice reflects negatively on credit score calculations.
Until the lawsuit is settled, consumers would be wise to review their credit files to see which companies are not reporting accurate credit limit data, and to be cautious about using these cards.
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