State Attorney General Goes After Capital One for Debt Collection and Re-Aging

West Virginia Attorney General Darrell McGraw announced Friday that his office has sued credit card issuer Capital One and a debt collection agency for “unconscionable conduct in connection with their credit card lending and collection practices.”

The complaint alleges that Capital One Bank, a subsidiary of Capital One Financial Corp. (NYSE: COF), tricked consumers into payment plans by sending them solicitations disguised as offers of new credit. The arrangement allowed Cap One to re-age the debt so that it did not fall under the statute of limitations.

The offer was sent to consumers who had charged-off accounts with Capital One or other creditors. Under the terms of the offer, Capital One agreed to provide the consumer $1 of new credit in exchange for the consumer’s agreeing to transfer the entire account balance of a charged-off account to the new credit card account.

“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 in a statement.

The complaint also alleges that Capital One issued multiple low-limit credit cards, each charging exorbitant fees, rather than raising credit limits on consumers’ existing accounts. Also that Capital One “unconscionably” imposed over-the-limit fees on consumers’ accounts, sold services to consumers who could not benefit from the services and billed and attempted to collect for credit card accounts that were never activated.

Attorney General McGraw’s complaint names a collection agency, COSI Receivables Management, but does not say how the company was involved and how or if it was at fault. Also named in the complaint are three collection and recovery units of Capital One.

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