Vision Credit Education, Inc.

West Virginia Attorney General Darrell McGraw has filed suit against Capital One Bank for what he calls “unconscionable conduct in connection with their credit card lending and collection practices.” In particular, it seems that customers were extended offers of what they thought were new credit card accounts if they agreed to transfer old collection debt previously charged off by Capital One. The amount of new credit was reportedly only $1.

The Purpose

When Capital One and any other credit card issuer encounters an account holder who falls 180 days delinquent, they are required by federal law to charge off the account as an uncollectible bad debt. This is written off as a loss, of which a portion is recovered by selling it to a debt collector.

Attorneys, debt buyers and collection agencies often purchase these accounts for pennies on the dollar and pursue collection activities against the debtor. There is no limit on how long they can pursue collection of the debt.

There is however a limit to how long they can pursue legal action against the debtor. The statute of limitations on a debt prevents a debtor from being sued over an old debt. A lender or their agent must pursue a judgment before the statute of limitations expires. This can vary considerably by state.

The AG’s office is specifically charging that Capital One extended what it claimed were credit offers to these debtors. However, it charged that many of these credit offers were for only $1. The catch was that the debtor had to transfer their old “expired” debt over to the new card, thereby re-aging the debt. Attorney General Darrell McGraw had harsh words for Capital One:

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.

Any debtor that agreed to this credit “offer” would be subject to new legal action on a debt that was previously off limits. They would have been at a disadvantage, since the old balance would once again be subject to fees and interest.  If the client wanted more available credit, they would have to pay down the old balance to well below the credit limit.

To further complicate matters, many of these accounts were charged a $59 annual fee. This annual fee was charged on the second billing cycle, thereby making account holders mistakenly believe they had more available credit. The annual fee would frequently cause clients to go over their credit limits, thereby incurring an over-the-limit fee.

West Virginia residents may contact the Attorney General at 1-800-368-8808 for more information.