ALEXANDRIA, Va. - (Mealey's) Capital One Financial Corp.
has agreed to pay $12 million to settle a suit brought by the U.S. Department
of Justice alleging that it violated credit protections granted to U.S.
military members by the Servicemembers Civil Relief Act (SCRA) via improper
home foreclosures, vehicle repossessions and credit rate denials, according to
a complaint the DOJ filed July 26 in a federal court in Virginia (United
States of America v. Capital One NA, et al., No. 12-00828, E.D. Va.).
The complaint, filed by the DOJ in the U.S. District
Court for the Eastern District of Virginia, includes a consent order whereby
Capital One agrees to the settlement.
The DOJ brought the suit on behalf of service members,
alleging that Capital One violated the SCRA from July 2006 to November
2011. According to the DOJ, Capital One denied interest rate adjustments
to active-duty service members, obtained default judgments in litigation and
foreclosed on homes and repossessed vehicles without court orders.
The settlement calls for Capital One to pay approximately
$7 million in damages. That amount includes at least $125,000 plus
compensation for lost equity to each service member whose home was improperly
foreclosed and $10,000 plus compensation for each repossessed vehicle.
Further, the settlement requires Capital One to place $5 million in a fund for
service members who did not receive proper credit card or loan interest rates.
Additionally, according to the consent order, Capital One
must within 30 days develop SCRA policies and procedures for interest rates to
ensure that it does not charge interest in excess of 6 percent per year during
a period of military service where the obligation was incurred before military
service and for which a service member requests SCRA protection. The
settlement also calls for Capital One to provide SCRA compliance training.
"Capital One has cooperated fully with the United States'
investigation in this matter," according to the consent order. "Capital
One began and completed extensive work with an independent consultant approved
by the [DOJ] to review its Accounts and identify the nature and scope of its
SCRA problems. This independent consultant has shared those results with
DOJ. Through its review, Capital One has identified victims of
SCRA-related violations involving the Accounts since July 15, 2006."
The settlement comes a week after the Consumer
Financial Protection Bureau and the Office of the Comptroller of the
Currency reached a $210 million settlement agreement with Capital One over its
allegedly deceptive credit card marketing practices.
The DOJ is represented by Assistant U.S. Attorney Kevin
J. Mikolashek in Alexandria, Va.,
and Tanya Ilona Kirwan and Sara L. Niles of the DOJ in Washington, D.C.
Capital One is represented by Richard Cullen, J. William
Boland, Bryan A. Fratkin, Evan Elizabeth Miller and Myra H. Chapman of
McGuireWoods in Richmond, Va.
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