Capital One to pay $12M in settlement

Michael P. Tremoglie Jul. 30, 2012, 1:12pm

WASHINGTON (Legal Newsline) - Capital One has agreed to pay approximately $12 million to settle a Justice Department lawsuit that accused it of violating the Servicemembers Civil Relief Act, it was announced Thursday.

Among the alleged violations were wrongful foreclosures, improper repossessions of motor vehicles, wrongful court judgments and improper denials of the six percent interest rate the SCRA guarantees to service members on some credit card and car loans.

"Today's action makes clear that the Justice Department will fight for our service members, and use every available tool, resource and authority to hold accountable those who engage in discriminatory practices targeting those who serve," Attorney General Eric Holder said.

"Every day, our brave men and women in uniform make tremendous sacrifices to protect the American people from a range of global threats - and my colleagues and I are determined to ensure that they receive our strongest support here at home."

According to the DOJ communique, Capital One will pay approximately $7 million in damages to service members for SCRA violations, including at least $125,000 in compensation plus compensation for any lost equity (with interest) to each servicemember whose home was unlawfully foreclosed upon, and at least $10,000 in compensation plus compensation for any lost equity (with interest) to each servicemember whose motor vehicle was unlawfully repossessed.

In addition, the agreement requires Capital One to provide a $5 million fund to compensate servicemembers who did not receive the appropriate amount of SCRA benefits on their credit card accounts, motor vehicle finance loans and consumer loans.

Whatever remains of the $5 million will be donated by Capital One to one or more charitable organizations that assist servicemembers.

Servicemembers will be identified and compensated by Capital One. All requests for a six percent rate relief in one area of its lending will be applied to all lending.

DOJ said Capital One cooperated fully with the investigation. It will pay more than the $12 million if it is determined there are violations from its recent acquisitions of HSBC and ING Direct USA.

Capital One adopted several policies exceeding SCRA requirements, such as extending a four percent interest rate to qualifying service members and giving an additional one-year grace period before de-enrolling service members from the reduced interest rate program.

The lawsuit was initiated after a complaint was received by the Office of the Staff Judge Advocate at Davis-Monthan Air Force Base in Arizona. It involved a single servicemember's failure to receive an interest rate reduction on his Capital One credit card account. The settlement comes after a two-year investigation by DOJ.

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