Capital One Twists Regulation Z to Bully Consumers


Anybody ever notice that when you turn Cap One into one word, you get “Capone,” like the famous ’20’s gangster?

A new Fed regulation–Regulation Z, Section 226.5(b)(2), to be precise–requires banks to send customers statements for charged-off accounts the bank is still charging interest on. As a result, customers will receive statements for charged-off balances, plus interest, even if the bank knows can’t legally get anything back. Capital One is one bank that seems to be trying to milk this regulation to get consumers to pay back their charged-off debt plus interest, according to an LA Times report:

Frank Cavestani and his wife fell behind on their Capital One credit card payments about a decade ago. Their accounts were subsequently closed by the lender, which wrote off about $2,000 in debt they couldn’t pay. So it was more than a little strange when the Hollywood couple received a pair of bills from Cap One the other day for a combined $5,195.07 in debt and interest.

Stranger still, when Cavestani contacted Cap One, he said a service rep told him the resurrecting of old loans is accommodated by recent credit card regulations approved by the Federal Reserve — even though most states have a statute of limitations for how long credit card debt can be pursued by a lender. In California’s case, that statute of limitations is four years. Cavestani’s debt dates back to 2000, which means Cap One can’t sue him for failing to pay up.

Cap One is apparently digging deep into its loan portfolio and ensuring that former customers remain on the hook, even if the company has no intention of actually going after the money. Why? The only reason I can think of is that it may want to sell the old loans to a debt collector and then let the collector take a shot at squeezing some cash from consumers….Without the ability to sue, all a debt collector can do is ask, pretty please, for some money….Or it can try to trick the unwary into thinking they have to make a payment, which is also what Cap One may be doing.

Here are debt collection statutes of limitations listed by state.

Are bright ideas like this why bankers were paid more than ever in 2010?