CHARLESTON, W. Va. (Legal Newsline) - Capital One Bank and four other companies have been sued by West Virginia Attorney General Darrell McGraw over allegations of unlawful debt collection practices.
Approximately 500,000 credit card accounts are held by the Virginia-based Capital One Bank by West Virginia consumers. The other four companies - Capital One Services LLC, Capital One Services II LLC, Capital One Services III LLC, and COSI Receivables Management LLC - are Delaware corporations servicing and collecting on their credit cards, which are issued by Capital One Bank.
McGraw had been under a federal court injunction that prohibited him from suing the bank for its credit card practices until recently. A motion to modify that injunction was granted by U.S. District Court Judge Robert Goodwin on Jan. 4. The newly modified order allows McGraw to sue the bank to enforce non-preempted substantive state laws.
McGraw's complaint, filed in the Circuit Court of Mason County, is based upon numerous violations of West Virginia's consumer protection laws. Capital One is alleged by the complaint to have solicited consumers to enter into debt repayment plans by sending them solicitations disguised as offers of new credit.
Consumers who had charged-off accounts with Capital One or other creditors were sent the offer, which required the consumers to agree to transfer the entire account balance of a charged-off account to a new credit card account to receive $1 of new credit from Capital One, McGraw said. To receive further increases on the new card's credit limit, consumers were required to make payments on the old debt, McGraw said.
Capital One was able to charge interest, late fees and over-the-limit fees on the consumer's debt that it would not otherwise have been subject to through this practice, McGraw said. Capital One was also allowed to re-age the debts, starting the applicable statute of limitations period anew, McGraw said.
"Capital One's practice of offering nominal extension of credit, if and only if, the consumer agreed to pay off a debt too old to be sued on is tantamount to loan sharking," McGraw said.
According to the complaint, Capital One also issued multiple low-limit credit cards that each charged exorbitant fees rather than raising credit limits on existing consumers' accounts.
Capital One is also alleged to have unconscionably imposed over-the-limit fees on consumers' accounts, sold services to consumers who could not benefit from them, and billed and attempted to collect for credit card accounts that were never activated.