Capital One Accused of Deceiving Credit Cardholders

A class-action lawsuit charges that Capital One deceived cardholders by claiming that a cash advance obtained through the company’s transfer balance program would include a 0 percent Annual Percentage Rate (“APR”) for one year.

The company also allegedly promised that credit balances on regular monthly purchases (“purchase balances”) would incur no interest as long as the balance was paid within 25 days.

However, according to the complaint, cardholders who took advantage of the transfer balance program were charged interest rates exceeding 13 percent on their purchase balances, even if the balance was paid on time, because payments were applied to the transfer balance rather than to the purchase balance.

This all sounds pretty familiar to Gabriel of Berkeley, Calif., who told ConsumerAffairs.com he wrote a "0% APR" check for $15,000.

"While the minimum payment was $160 a month and the due date was the 23rd of the month, I paid two weeks early and $200 a month rather than $160. I just didn't want any mistakes that would increase my rate from 0% to 17%," Gabrield said. "I set up automatic payment on my online banking account. I started paying $200 in early April and in early May. My statements looked good. It seemed like this was actually going to work for me."

But then, Gabriel said, he got hit with a $300 finance charge, an increase from 0% to 17% that the bank's representatives could not explain.

The lawsuit alleges that Capital One’s actions constitute a breach of contract and the duty of good faith and fair dealing, in addition to violations of the Virginia Consumer Protection Act and the Michigan Consumer Protection Act. The case also argues that Capital One received unjust enrichment through the alleged scheme.

“If proven, these gimmicks would make it impossible for consumers to predict what they will owe when using their card,” said Steve Berman, managing partner of Hagens Berman, the Seattle law firm filing the suit. “They made their payments on time and did everything right, but they were charged extremely high rates regardless.”

The case asks the court to declare Capital One’s acts a breach of contract and award plaintiffs damages.