- Claims alleging print or electronic media advertised claims or practices misrepresent the service or product offer; and
Capital One is facing a host of consumer complaints and pending legal action over its pre-Christmas flurry of blank checks to cardholders.
The promotion promised a starting rate of 5.99% fixed APR; and that after October 2007 the rate would drop to a 4.99% fixed APR. What Capital One did not tell consumers was that any purchases made with the blank checks would automatically be paid off first. This goes against the industry's "last in-first out" payment standard, where the last purchase made on a credit card is typically the first purchase paid off.
A History of Problems
This is not the first time that Capital One has handed in hot water. In 2005, the Attorney General of West Virginia Darrell McGraw filed suits to enforce subpoenas given to Capital One.
Back in December 2004, The Attorney General of Minnesota filed a civil suit in District Court alleging that Capital One has violated Minnesota consumer protection laws by using false, deceptive and misleading advertising to market credit cards with allegedly "low" and "fixed" interest rates that will never increase.
Capital One has also come under fire for reporting practices that damage a consumer's credit rating.
One customer, "Adam," had this to say about the blank check promotion: "My balance from these check transactions accrued interest charges much higher than I anticipated. My balance of $374 and payment of $35 shot up to almost $500 and payment of $65.00. I hurried up and paid them off once I called customer service and was told just how the blank check promotion worked."
"The 'fixed' rate of my Capitol One Credit Card [rose] without warning," said "James" from California: "The damages that I suffered are a significantly higher interest rate on my balances: a 5.0% increase!
"Mark" of Georgia was worried about his credit rating as a result of dealings with Capital One: "[Capital One's] not reporting credit limits as they are required to do under the FCRA has caused my wife and I to pay more for credit, because our credit scores were lowered by Experian, Trans Union, and Equifax."
The Fine Print
Savvy consumers know that when it comes to credit cards, it's crucial to read the fine print. But what if there's no fine print that explains your sudden jump in interest? As in the Capital One situation, that's when consumer complaints and lawsuits rear their heads.
The Federal Reserve has started a major review of credit card disclosures and, in January, the Senate Banking Committee held a hearing on fairness issues in credit card terms. The Federal Reserve is currently developing new requirements for companies to disclose various payment and fee schedules, lawmakers and executives said.
Democrat Carl Levin, the Senate panel's chairman, said legislation may be needed to stop what he called predatory practices by credit cards. "Our investigation found that even accounts in good standing are socked unfairly by little known practices that inflate interest charges," Levin told the Senate Banking Committee.