Capital One must repay $340,000 to bankrupt debtors
Issuer collected credit card debts already discharged in bankruptcy
An auditor will review 650,000 Capital One credit card accounts to ensure that money improperly collected from people whose debts were already discharged in bankruptcy proceedings are returned.
In a settlement announced Oct. 2 by the U.S. Trustee Program, the U.S. Justice Department agency that oversees the bankruptcy courts, Capital One must repay $340,000 to credit card account holders. Under bankruptcy laws, credit card and other debts cannot be collected by creditors if they have been dismissed in bankruptcy proceedings. (See Bankruptcies creeping upward as economy sours, 11 tips for dealing with debt collection and debt collectors.)
Creditors must file "proof of claim" forms with the bankruptcy court detailing how much debtors owe, dates the debts were incurred and whether the debts are secured, such as with property, or unsecured, as in credit card loans. The form establishes which creditors have priority in payment through the bankruptcy courts.
"Capital One filed approximately 5,600 proofs of claim seeking payment of debts that had been discharged in prior bankruptcy cases," according to trustee program allegations. In the complaint, Capital One acknowledged receiving $340,000 from estates filing for Chapter 13 bankruptcy, but indicated the issuer "has returned most of the improperly obtained payments."
According to the trustee program, "The auditor will also approve reimbursement to debtors and trustees for actual out-of-pocket costs and expenses, including attorneys' fees incurred to contest erroneous claims."
An auditor will review Capital One claims filed from Jan. 1, 2005, up until two years after a consent degree on the settlement is entered in court. The settlement must be approved by the U.S. Bankruptcy Court for the District of Massachusetts. The audit period may be extended an additional year if more than 100 false claims are found in one year.
As of February 2008, Capital One was the fifth largest issuer of general purpose credit cards in the United States, according to SEC documents.
See related: State by state bankruptcy filings, Bankruptcies creeping upward as economy sours, 5 tips for those considering bankruptcy, Bankruptcy law updates make it harder to discharge debts, 11 tips for dealing with debt collection and debt collectors, Bankruptcy filers save $25 and a lesson on lucrative nonprofits
- Fed: Balances on cards rose $1.2 billion in July – Credit card balances rose at a 1.5 percent annualized rate in July, the Federal Reserve said, reversing a decline the previous month ...
- Main lesson after Equifax breach: Protect yourself – September 2018 marks the first anniversary of Equifax's massive breach, which prompted calls for tougher security. Continuing hacks, however, prove that breaches won't cease. ...
- Surprising credit card travel exclusions – Your credit card's travel insurance may not cover injuries sustained while taking part in a protest or riot, driving under the influence, skydiving, or due to a pre-existing medical condition ...