Capital One Sued Over Credit Card Ads. (What's *not* in your wallet?)

Reuters/Yahoo ^

[Uncledave]

NEW YORK (Reuters) - Minnesota's attorney general has sued credit card issuer Capital One Financial Corp. (NYSE:COF - news), accusing the big U.S. credit card issuer of falsely advertising low rates and defrauding consumers.

Attorney General Mike Hatch said Capital One nearly quadruples the rate it charges some card customers who trigger a "penalty" rate by paying a bill a day late or defaulting in other ways, according to a complaint filed on Thursday in a Ramsey County District Court in Minnesota and posted on Hatch's Web site.

A spokesperson for Capital One, based in McLean, Virginia, could not be immediately reached for comment. A spokeswoman told the Star Tribune newspaper of Minneapolis that the company "believes it has acted properly and in full compliance with the law," and is cooperating with the attorney general.

According to the complaint, cardholders who receive an initial 4.99 percent interest rate and later default may see their rate skyrocket to 19.8 percent, even though Capital One advertised that the lower rate was "fixed."

The lawsuit said Capital One's marketing violates state laws against false advertising, consumer fraud and deceptive trade practices. Minnesota is seeking restitution for cardholders, civil penalties, disgorgement of profits, and an injunction barring further wrongdoing.

[mtngrl@vrwc]

I just found out they bumped my rate to 28.99.

Oh my goodness, you weren't kidding when you told me that your interest rate had been increased big time!

We have a Capital One credit card that we are using only because there is no interest for six months. This thread is all the incentive I need to make sure the balance gets paid off before the six months are over. If not, we will find another credit card with zero interest and transfer the balance over there.

[Indrid Cold]

"It's really the merchant getting hosed. He has to loan the purchase price, interest free to the customer for a month, then to the CC company for another month, AND pay 3% for the privelige."

Not so, at least not in standard retail. When we make a CC sale, we have the money in our account in about 3 days.

[Still Thinking]

How long has that been the case? My information may be out of date (and may have been incomplete even back then).

[Indrid Cold]

Ever since we've been taking credit cards as payment, 8 years now and running. There's no way I'd wait 30 to 60 days for payment. I could sell the same widget 4 times by then.

[Chemist_Geek]

If the post office looses your payment, and delivers it a week late, do you get kicked up to the default rate?

Yes.

Credit card companies loved September 11th and the anthrax attacks on the U.S. mail - they "legitimately" charged billions of dollars of late fees, and raised rates afterwards on cardholders. They're still making money off of that.

Having said that, it's also been proven that many credit card companies are...creative...in when and how they collect their mail. Oops, more late fees! Darn, a default rate!

[Chemist_Geek]

When some company tried to pull that scam on me, I went to the trouble of getting certified checks from the credit union, and mailing them using certified mail return receipt requested.

It only took one time FAXing a copy of the return receipt, before they quit trying to play that game.

[okkev68]

I just sent Fleet a very nasty letter threatening legal action for the same thing. I had a small balance on a 0% for 6 months offer and when I opened up a statement one day they had jacked my interest rate to 28% saying I had been late with a payment.

I sent them a check for the full amount and gave them 30 days to close the account and report it and take me off of their advertising lists or they would be hearing from a lawyer.

I wasn't a large amount of money, but the fact they took 8 days to process my payment and then jack my rate up was enough for me.

[SC Swamp Fox]

Let me tell ya, being 38, married, and unable to save much for retirement because I'm still digging out from over $20,000 of credit card debt, sucks. It's a long, hard, crushing slog.

I've been there, I was over $22k in debt. I finally had to take all of the cards away from my wife and close all of the accounts. I had to get a 401k loan just to catch up and then restructured the remaining debt. That was 5 years ago, I have 14 more months before I become totally debt-free.

The amazing thing is that I still get credit card offers in the mail every day.

[pepperdog]

Several nifty things CC companies are doing these days that many consumers don't know about: they pull a credit report on you and if they "determine" your credit worthiness is not what they think it should be, for instance if your obligations have gone up, like if you buy a new car, they can raise your CC interest rate.

Also if you make a minimum payment they can raise your interest rate.

Another cool move they make is to sell your low interest account to another cc company who then raises the rate. I caught one who did this to me and found my interest rate was going from around 4% to 19.5% When I complained they lowered it but I think it should be illegal and I have written to my representatives about it.

In simple language this means they can raise your interest rate any time they wish regardless of your on-time payment records and they get to decide why and when.

Don't ever make a minimum payment on a credit card. Watch the interest rate, it may change and you may not be be notified.

[BJungNan]

Certainly, there are other choices of card companies. But, for those that have been in trouble financially or are just starting out with credit, Capital One does get someone back on their credit feet.

The rate starts high but as you demonsrate an ability to pay, they will lower it. And if you pay your bill on time, there is no penalty.

Don't spend tomorrow's money today. Pay your card off each month, leave just a small amount owing each month.