“Capital One has a history of deceptive and abusive credit card practices,” said John Taylor, president and chief executive of the National Community Reinvestment Coalition, a consumer group. “We raised these issues with the Federal Reserve . . . but regulators allowed the credit card company to grow larger.”
Taylor’s group led the charge last year to oppose Capital One’s $9 billion purchase of ING Direct, accusing the McLean bank of steering low-to-moderate-income borrowers into subprime credit cards. The group argued that the deal should not be approved without Capital One doing more to address the needs of underserved communities.
Regulators approved the deal with conditions that Capital One enhance its risk management and compliance controls. It also ordered the bank to tweak internal controls for debt collection and lending in response to consumer complaints.
According to the CFPB’s consumer complaint database, there have been 393 credit card complaints against Capital One since June 1. That number accounts for about 22 percent of the total.
The CFPB, along with the Federal Deposit Insurance Corp., is conducting a similar probe of Discover Financial Services. The credit card company said in a regulatory filing that losses tied to the investigation could exceed $100 million.
“Congress created the CFPB to go after this exact type of behavior,” said Jaret Seiberg, senior policy analyst at Guggenheim Partners. “They’ve been focusing on enforcement since Day One, and the fruits of that labor will start to surface in the next couple of months.”
In the case against Capital One, Seiberg said, “there is a real danger of extrapolating too much out of the investigation.” He added, “It would be impossible to find a large business that doesn’t run into problems” with outside vendors.
“This was clearly a case where telemarketers went far beyond what’s permitted, but that doesn’t mean you can condemn the entire business,” he said.
Capital One’s stock tumbled 1.7 percent to close at $54.89 a share. The bank also announced second-quarter earnings Wednesday of $92 million, down 90 percent from the same period a year ago.
Capital One’s settlement arrives on the heels of a series of probes into banking misconduct. This week, Senate lawmakers released a report admonishing HSBC for failing to monitor money laundering by Mexican drug cartels.
Barclays, in late June, agreed to pay $450 million to U.S. and British regulators to settle allegations that it schemed to rig the London interbank offered rate, or Libor, a critical lending rate used around the world. The case is part of a far-reaching investigation into the actions of some of the world’s largest banks.