Capital One, ARM Firm Settle Credit and Debt Collection Case for $13.5 million

West Virginia Attorney General Darrell McGraw announced Tuesday a settlement his office reached with Capital One and various affiliated businesses to resolve claims involving credit card practices in place prior to January 1, 2006. The settlement calls for $10.5 million to be paid by Cap One and $3 million in credit card debt to be forgiven.

The case names Capital One Bank (USA) N.A.; Capital One Service, LLC, a Delaware corporation; Capital One Services II, LLC; Capital One Services III, LLC; and COSI Receivables Management, Inc. (collectively referred to as Capital One),

In 2005, the Attorney General’s office began an investigation into Capital One’s credit practices, which spawned a legal battle in two circuit courts, the West Virginia Supreme Court, and the Southern District of West Virginia.

After the United States Supreme Court paved the way for the State of West Virginia to proceed against Capital One, the West Virginia Attorney General’s office filed an action in 2010 in Mason County, before the Honorable Judge David W. Nibert. The trial was to start on April 24, 2012. In that initial filing, McGraw accused Capital One of “unconscionable conduct in connection with their credit card lending and collection practices.” A specific allegation of re-aging debt that was beyond the statute of limitations was made in the AG’s press release.

But the settlement announcement is remarkably short on details. It does not specify the alleged violations, just that Capital One had settled them without admitting wrongdoing. The AG’s press release noted that the settlement resolves claims related to practices utilized from 2001 through 2005 involving the sale of payment protection and the Credit Recovery Services line of business.

Capital One agreed to provide $3 million in debt forgiveness to West Virginia consumers, $9.5 million to the State of West Virginia to be used for financial relief for West Virginia consumers, and $1 million to the Attorney General’s office for consumer education and restitution.

McGraw commented, “This was a hard-fought battle, resulting in a lot of money for the State of West Virginia. Capital One is to be commended for changing the practices that prompted the State’s action.”

“We’re pleased to have worked with Attorney General McGraw to resolve this matter which dates back to a time prior to 2006,” said Tatiana Stead, spokesperson for Capital One. “We’ve since made significant improvements and look forward to continuing to serve our card customers in West Virginia.”