Capital One Settles Service Member Credit Violations For $12 Million

Capital One Settles Service Member Credit Violations For $12 Million

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.). 

(Complaint available. Document #88-120827-240C.) 

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.    

Settlement Details 

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.

Attorneys 

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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