Tuesday, August 6, 2013

Capital One Credit Card Accounts in Court


Capital One Bank USA, N.A. (“Capital One”) is a national bank as indicated by the “N.A.” suffix in its name.  It typically brings its own debt-collection lawsuits, rather than selling charged-off accounts to debt buyers (hough there is some of that too, e.g. debt collection suits by Cach, LLC, and Midland Funding, LLC). 

Capital One (i.e., the two-word version of the name) is not the bank’s legal name. It is a federally registered service mark.  

The Comptroller of the Currency’s web site indicates that there are actually two different Capital One banks, with separate charter numbers: Capital One Bank (USA), National Association and Capital One, National Association, with different location. 

Both entities’ names appear in debt collection lawsuits, sometimes within the same suit. 

Suing in its own legal name puts the bank in a better position to prove its case than the assignee. 

In 2012, Capital One (both banks) acquired the credit card portfolio of HSBC Bank Nevada, National Association, Las Vegas, Nevada (“HSBC Nevada”), which subsequently went out of business as a bank by merging into is non-bank parent. 

Transaction summary for HSBC-Capital One Deal
for Acquisition of Credit Card Portfolio

Debt collection suits based on Capital One cards are filed by several leading law firms engaged in debt collection in Texas: JENKINS WAGNON & YOUNG, P.C.; RAUSCH, STURM, ISRAEL, ENERSON & HORNIK, LLC; MICHAEL J. SCOTT, PC (Michael Joseph Scott).  

RAUSCH has also brought suits on debt owed on Capital One credit cards that was sold to Cach, LLC. 

Over the course of a one-year period ending August 19, 2013, Capital One filed 246 lawsuits in county courts at law in Harris County. This is the total for lawsuits by several Capital One entities (or filed under different name versions of the same entity): CAPITAL ONE USA, NA / CAPITAL ONE (USA) NA; CAPITAL ONE NA / CAPITAL ONE NATIONAL ASSOCIATION;  CAPITAL ONE AUTO FINANCE; and CAPITAL ONE AUTO FINANCE INC. The electronic docketing system and search function allows for parentheses in a name, but does not provide for use of punctuation. 

Capital One rarely files suits in Harris County District Courts. The number in those courts is insignificant. 


Capital One’s standard account agreements are titled “CUSTOMER AGREEMENT”. The older ones typically consist to two pages, with an “ARBITRATION AGREEMENT” as a separate page. The last paragraph of the CUSTOMER AGREEMENT addresses arbitration, and incorporates the separate one-page arb agreement by reference.  The newer versions (2010 forward) are comprised of multiple pages, each with two columns, with text that is printed in larger font than was the case with older ones (which can be hard to decipher if the reproduction is bad).  Version codes and copyright years typically appear on the bottom of the last page of the agreement.  


There are also substantive differences: The older customer agreements include arbitration provisions while the more recent ones do not. 

This raises an interesting issue for accounts that predate the arrival of the new customer agreements. If the original contract encompassed an irrevocable arbitration agreement, can the arbitration agreement nevertheless be superseded by a modification agreement that deletes any reference to arbitration? 

Of course the issue is only of import when the defendant in a debt collection suit (or the attorney for the defendant) sees an advantage in having the claim arbitrated. After all, the right to arbitrate is contractual, and can be waived. 


Whether or not arbitration provisions are included in customer agreements drafted by Capital One, all versions have a choice of law clause that provides for application of Virginia law. Some time ago, Capital One lost on the statute-of-limitations issue in Florida, when a court there ruled that the shorter statute of limitations applied to a debt collection suit filed by Capital One against a debtor in that state.  So Capital One then modified the choice of law clause in its standard CUSTOMER AGREEMENTS to assure for itself the benefit of the longer limitations period. The typical choice of law language now reads like this: 
“We make decisions to grant credit and issue you a Card from our offices in Virginia. This Agreement will be interpreted using Virginia law. Federal law will be used when it applies. You waive any applicable statute of limitations as the law allows. Otherwise, the applicable statute of limitations period for all provisions and purposes under this Agreement (including the right to collect debt) will be the longer period provided by Virginia or the jurisdiction where you live. If any part of this Agreement is found to be unenforceable, the remaining parts will remain in effect.” 


The newer, multi-page CAPITAL ONE CUSTOMER AGREEMENTS, contain an enumeration of other documents that are defined as being part of the contract in addition to “this agreement”, which is numbered (1). The list includes Truth in Lending Disclosures regardless when issued, “all other documents and disclosures relating to your Account including those provided online”, and “any future changes we make to any of the above things” [sic].  

Enumeration of documents in 2013 version of Capital One Customer Agreement

This raises an interesting question also: Does the presence of the list in the document Capital One presents as the applicable contract elevate the proof requirements for the bank as movant for summary judgment?

After all, the incorporation of additional documents by reference indicates that the CUSTOMER AGREEMENT, standing by itself, is not complete.  Even if an examination of all of the contract language contained in the CUSTOMER AGREEMENT were to reveal that it covers each of the essential elements of a contract for an open-end credit account, the list expressly contemplates that those terms may be changed by the bank in the future. So, arguably, when Capital One sues, it would have to adduce competent testimony to the effect that no changes were subsequently made, or testimony to the effect that some terms were indeed modified. In the latter case, the modification document(s) would have to be attached because the summary judgment rules require attachment of referenced documents. 

Typically, however, the affidavits filed by Capital One are not very elaborate. Titled “BUSINESS RECORDS AFFIDAVIT” rather than Summary Judgment Affidavit, they are limited in purpose (authentication of account records) and consist only of a few paragraphs. They typically contain only one fact above and beyond the predicate verbiage for the admission of account records: the date of account creation, with reference to what the records show. Capital One usually includes a document rarely seen in the summary judgment submissions of other debt plaintiffs: a copy of the account application. This exhibit is normally incomplete (typically only the front page is included) and is often of poor reproductive quality, which makes it illegible in part).  

According to a class action complaint filed in California, Capital One mass-mailed credit cards offers that promised a low fixed APR of 6.99% that would change only under three specified conditions.The rate would apply to purchases and balance transfers. Capital One would then hike the rate on consumers that open accounts under the offered rate even though they had complied with their payment obligations. Capital One did so for "market-based" reasons, i.e. to maximize its own profiles, rather then any act or omission on the part of cardholders. The solicitations had specifically stated  THIS IS NOT AN INTRODUCTORY RATE.. Rubio v. Capital One Bank. 
Misleading solicitation material promised a low "fixed" rate  

Rubio was a recipient of the direct-mail offer and opened an account, but had her rate subsequently raised to 15.9% even though she did not do anything to trigger the three conditions under which the rate could be hiked. The cardmember agreement that Capital One mailed after the consumer had accepted the offer contained a reservation of rights clause as to future changes of terms, but the solicitation did not do so in the box in which the “fixed” interest rate was displayed. Outside the so-called “Schumer Box”, but farther down on the same page, there was a heading that read "Terms of Offer." Under that heading, in fine print, the solicitation provided, as part of the terms: "I will receive the Capital One Customer Agreement and am bound by its terms and future revisions thereof. My Agreement terms (for example, rates and fees) are subject to change."
When the consumer eventually sued Capital One for deceptive practices in advertising its low-rate credit card, she sued as a cardholder who had never submitted a late payment, exceeded her credit limit, or had her payment returned. She nevertheless received written notification from Capital One that her "fixed" APR of 6.99% would increase to 15.9%. The only way for her to avoid the increase was by closing her credit card account and paying off the balance.
The federal district court dismissed the consumer’s complaint about the increase in the “fixed” rate, but the Ninth Court of Appeals reversed the dismissal and revived the lawsuit, finding that the consumer had stated a claim under TILA that deserved to go forward because the disclosure in the solicitation did not meet the TILA requirement for clarity and conspicuousness. In reaching this conclusion, the federal court of appeals referenced the findings of a study commissioned by the FED that concluded that consumers interpret the term “fixed” rate as a rate that would not change. 
TILA and Regulation Z require a Schumer Box to disclose credit card APRs. 15 U.S.C. § 1637(c)(1)(A)(i)(I); 12 C.F.R. § 226.5a(b)(1). This disclosure must be clear and conspicuous, 15 U.S.C. § 1632(a); 12 C.F.R. § 226.5(a)(1), which, for purposes of credit card solicitations, is defined in the official staff commentary to Regulation Z as "in a reasonably understandable form and readily noticeable to the consumer." 12 C.F.R. pt. 226 supp. I, para. 5a(a)(2), cmt. 1. Thus, Regulation Z prohibits a Schumer Box from making "misleading" APR disclosures, where "misleading" means a disclosure that a reasonable consumer will either not understand or not readily notice under the "reasonable cardholder" standard”. Put differently, an APR disclosure that is not "clear and conspicuous" is ipso facto "misleading."


  1. Does Capital One need to provide proof of a credit card agreement for HSBC accounts? How do those accounts transfer to Capital One. I'm being sued by Capital One for an old hsbc account (2007). The debt collector has failed to provide a credit card agreement or any agreement with Capital One or HSBC ... actually it was a credit card that was bought by hsbc then by capital one. I'm going to send in letter to the judge as a general denial.

  2. I am with the previous commenter. How can they prove we owe the amount suggested if they have purchased it from another company? We can have no control over whatever agreement Capitol One made. Now that a law firm is trying to sue for an amount I am positive they inflated in order to meet the minimum requirements to see in Small Claims Court. Their settlement offer is 50 dollars less than the amount owed. That's ridiculous! With the amount we owe, I would rather pay a Lawyer to have the case dropped, than to risk paying these vultures who might require a social security number. That last time I was sued for a debt that is exactly what they tried to do. If you agree to pay them, they ask the judge for summary judgement but delay judgement execution until the amount being sued for was paid off. So, it's black mail. There have been reports of numerous instances where the Law Firm black mails for more money beyond what is owed and if you refuse they exercise judgement.

    So, for anyone reading this, it is IMPORTANT that you defend yourself against these vultures! If you couldn't pay, what makes them think you suddenly have the means now? Debtor's prison is illegal and gone. It's not against the law to be poor.