Failing to pay off a monthly credit card bill is never ideal, but it’s not the end of the world. Individuals are able to pay off credit debt they’ve accrued by making payments as and when they can. What, however, if the credit card company is taking those payments and splitting them up to pay a portion of several debts, but never one whole debt? An individual’s debt would never be paid down – and the credit card company would be able to impose more fees and interest charges.
The complaint claims that this constitutes consumer fraud and breach of contract.
Capital One Bank has been accused of doing just that in a lawsuit filed Tuesday in Virginia. The suit, filed by plaintiff Margaret Murr, claims that Capital One misleads consumers about its credit card fees and the conditions linked to its zero percent APR checks. She also claims that the company made negative reports about her that affected her credit score.
The problem began when Murr signed up to Capital One’s zero percent APR access check program. This is one section of customer credit accounts – which are divided into four sections by the company – used to make balance transfers, rather than purchases. This transfer section of the credit account is billed as having zero percent APR - unlike purchases, which are subject to interest charges if customers are unable to pay off the debt by the agreed time. Different sections of a customer’s credit account may also be subject to different ‘grace periods’ before fees are charged.
Activating the access check program allowed Murr to make transfers from her credit card without interest being charged for 12 months, with a flat fee of 2 percent. This she did, in October 2012 when she paid more than $4000 in property taxes from her Capital One account. However, according to the complaint, Capital One had removed the 12-month grace period without Murr’s knowledge, and as such required the entire access check balance to be paid off during the ‘billing cycle’ – typically one month – in which it was accrued. When Murr began to make payments towards this debt, the bank allegedly divided the payments between different sections of the credit account, therefore ensuring that a portion of the balance remained unpaid, and fees could continue to be charged. Murr was then charged interest and fees even in months when she did not use her credit card, the suit says.
The complaint claims that this constitutes consumer fraud and breach of contract and seeks to certify a class membership of consumers who had payments divided in this way and incurred fees. Murr also alleges that the bank charged interest on the $4000 payment before the 12 months of zero percent APR had expired and reported non-payments to credit agencies, damaging her credit score.
It’s an important warning to all consumers: make sure you understand the terms and conditions of any credit account used, and especially the way in which debt payments will be handled.
The case, filed in the U.S. District Court for the Eastern District of Virginia, is Murr v. Capital One Bank (USA), N.A