Assistant Attorney General Thomas Perez discusses how the U.S. Department of Justice tackles illegal lending practices July 13, 2012, in Washington, D.C. (Photo courtesy of DOJ/Lonnie Tague)
WASHINGTON - Capital One Bank has agreed to pay $12 million to resolve a lawsuit alleging the company violated specialized consumer protections guaranteed under federal law for active-duty military personnel, according to officials with the U.S. Department of Justice.
“This action makes clear that the Justice Department will fight for our service members and use every available tool, resource and authority to hold accountable those who engage in discriminatory practices targeting those who serve,” Attorney General Eric Holder said Thursday in a press release.
The Justice Department sued Capital One under the Servicemembers Civil Relief Act, following a two-year investigation that found the company violated federal law from 2006 through 2011.
The settlement covers a range of conduct that violated federal law, including unlawful foreclosures, improper repossessions of motor vehicles, wrongful court judgments, improper denials of the 6 percent interest rate guaranteed for some credit card and car loans, and insufficient benefits granted on credit cards, car loans and other types of accounts.
As part of the agreement, Capital One will pay $7 million in damages to service members for violations, including at least $125,000 in compensation plus damages for any lost equity to each military member whose home was unlawfully foreclosed upon, and at least $10,000 for servicemembers whose motor vehicle was unlawfully repossessed.
In addition, the agreement requires Capital One to provide a $5 million fund to compensate servicemembers who did not receive the appropriate amount of benefits on their credit card accounts, motor vehicle finance loans and consumer loans.
The Justice Department also ordered Capital One to donate any remaining portion of the $5 million to one or more charitable organizations that assist servicemembers.
“Every day, our brave men and women in uniform make tremendous sacrifices to protect the American people from a range of global threats,” Holder said, “and my colleagues and I are determined to ensure that they receive our strongest support here at home.”
The proposed consent order, which was filed simultaneously with the complaint, is one of the most comprehensive settlements obtained by a government agency or private party.
“This settlement demonstrates that the Justice Department will take any and all actions to ensure that the rights of service members are protected,” said Thomas E. Perez, assistant attorney general for the Civil Rights Division. “We rely on these brave men and women to protect the safety and security of this country, and we will be vigilant in protecting their rights at home.”
In response to the lawsuit, Capital One recently adopted several policies that go beyond the federal requirements, such as extending a 4 percent interest rate to qualifying servicemembers and giving an additional one-year grace period before de-enrolling members of the military from the reduced interest rate program.
The agreement, which is subject to court approval, was filed in federal court in Alexandria, Va., following a two-year-investigation that began after Justice Department officials learned that a servicemember had lodged a complaint with the Office of the Staff Judge Advocate at Davis-Monthan Air Force Base in Arizona.
For more information about the settlement and federal laws pertaining to servicemembers, visit www.servicemembers.gov, e-mail SCRA@usdoj.gov or call 1-800-896-7743.