When Richard D. Fairbank graduated in 1972 with a bachelor’s degree from Stanford University, he desired to work with children. He founded a champion swimmers training school but still wanted to achieve his dream of being an entrepreneur. Unfortunately, he lacked practical knowledge and money to start a business so Fairbank returned to Stanford University and graduated with a master’s degree.
He later got a job that allowed him to gain insight into the retail banking industry. In 1988, Fairbank partnered with Nigel Morris to launch what would be Capital One as we know it. The visionary may have encountered hurdles during the startup process, but Fairbank is far from dealing with challenges even today. His bank has shelled out millions through legal proceedings, among which are the biggest Capital One lawsuits in listed below.
10. SEC v. Capital One – $3.5 Million
In 2013, Capital One’s wallet grew smaller as SEC filed a cease and desist order against the bank and its two executives. According to SEC, the bank understated its auto finance losses amounting to millions of dollars, ahead of the financial crisis that hit the world in late 2007. According to Courthouse News, Capital One did not incorporate the internal assets properly. For this reason, it understated the loss expense by around 18% in the second quarter and 9% in the third quarter because the actual figures were higher than the bank expected.
SEC said that most of the profits generated in the auto finance business were from lending to customers with poor credit histories. Consequently, the bank incurred huge losses but understated the amount by at least $132 million in the months preceding the financial crisis. The executives agreed to pay $135,000 in fines to settle the SEC charges. Capital One, on the other hand, paid $3.5 million and insisted that no customers were affected. The bank even said that SEC had not criticized the auto finance unit reserves and thus it was not obligated to share its financial statements.
9. Dorothy Gales v. Capital One – $4.4 Million
Gales filed a class action lawsuit against the bank, alleging that Capital One had violated the Maryland statutes. In her claim, Gales said the bank misled borrowers into believing their repossessed cars were sold at a public auction. Yet, they had been disposed of privately. In so doing, Capital One did not provide the post-sale notices containing information needed after a private sale for any repossessed sales occurring at Manheim Baltimore-Washington.
Repossession laws stipulated under Maryland statutes require a “Notice to Buyers” to be provided detailing their rights, and borrowers must be provided with the sales contract. Borrowers have a right to redeem their cars if they pay reasonable expenses that a lender incurred during repossession. Borrowers must also be issued with the “Required Notice” to remind them of their right to redeem. The notice also contains details of the location and resale of the vehicle and a lender must wait 15 days after issuing it by certified mail before attempting to resell the automobile. Although Capital One did not admit liability in the class action suit, it still agreed to settle the capital One lawsuit by paying $4.4 million.
8. Jacob Figueroa v. Capital One – $13 Million
Figueroa and Mary Jackson were the plaintiffs in 2018 in a lawsuit that alleged Capital One had charged deceptive fees that violated the customer accounts. According to the plaintiffs, Capital One charged multiple fees for such OON ATM transactions such that the bank charged a fee, while the OON operator levied a fee too. Capital One still charged other fees for OON withdrawals. In this case, account holders pay the bank two OON fees and another fee to the OON ATM operator.
The plaintiffs explained that the two fees to Capital One during withdrawal occurred if an account holder first asked to check their balance before withdrawing funds. Consequently, the bank charged a fee for balance inquiry and another for withdrawing, leading to a total of $7 in fees. The plaintiffs further argued that the amount accrued to over a year of interest, but Capital One as always, did not admit liability. Instead, it chose to settle the matter by paying $13 million.
7. Capital One v. John A. Kanas and John Bohlsen – $20 Million
In 2011, Capital One sued former CEO of BankUnited John Adam Kanas and former vice chairman John Bohlsen for breaching a non-compete agreement signed in 2006. Capital One had acquired North Fork Bancorporation in 2006, a bank holding company in which Kanas and Bohlsen had served for 30 and 15 years consecutively. The acquisition cost Capital One about $13.2 billion and the two top executives held less than 1% each of North Fork’s outstanding shares. On March 12, 2006, Capital One had both executives sign a Restricted Share Agreement (RSA) contingent upon the summation of the merger and transfer of their respective 1% interests.
Under the agreement, Kanas would receive $24 million while Bohlsen would be paid $18 million if the acquisition was successful. The deal also ensured that the executives would remain employees of Capital One for three years with effect from the date of the merger. It also stated that they would not engage in a competitive business for five years after ending their employment with Capital One. The RSA became effective in December 2006 after the merger closed, but in July 2007, both Capital One and the two executives agreed to end the employment relationship. In 2009, Kanas, Bolhsen, and other investors formed BankUnited. Capital sued the defendants for violating the RSA and demanded they return the compensation they had received. Consequently, the defendant agreed to pay $20 million to Capital One.
6. Re: Checking Account Overdraft Litigation – $31 Million
In January 2022, Capital One announced that it would no longer be charging overdraft fees, and it has kept its word. Perhaps this decision was after the millions it had to pay to settle a lawsuit that alleged deceptive overdraft fees. There were over 600,000 class action members, but Capital One insisted that there had been no wrongdoing. Hence, it tried to have the case dismissed thrice before finally settling. The suit claimed that Capital One and other defendants intentionally reordered transactions to entice customers into overdrafts faster so the banks could increase their overdraft fees revenues.
Capital One should have posted the transaction in chronological order rather than from highest dollar value to lowest, a trick that pushed customers to overdraft more quickly. However, Capital One and the other financial institutions said they had not violated any laws by reordering the transactions. After almost five years of going back and forth, Capital One agreed to settle and end the claims, a decision that set it back $31.8 million.
5. Nicholas Martin, et al. v. Leading Edge Recovery Solutions, LLC and Capital One Bank – $73 Million
Nicholas Martin filed a class action lawsuit against Leading Edge Recovery Solutions in the Northern District of Illinois on August 25, 2011, but did not name Capital One as a defendant. However, Martin added the banking corporation on January 18, 2012, and Mack as an additional plaintiff, alleging that the two defendants had violated the Telephone Consumer Protection Act (TCPA). According to the plaintiffs, the two companies had used an artificial prerecorded voice and automatic telephone dialing systems to call cell phones without the express consent of the plaintiffs.
Two other people, Tiffany Alarcon and Charles Patterson filed similar suits against Capital one. Consequently, the plaintiffs filed a Consolidated Master Class Action Complaint on February 28, 2013, against Leading Edge, Capital One, AllianceOne, and CMS. The defendants denied the allegations, but negotiations continued over several months. They finally agreed to settle the matter to avoid going to trial. The entire settlement amount for the three defendants was $75, 455,098. 74 and Capital One paid $73 million, while the rest was distributed among the other three defendants.
4. Baird v. Capital One – $ 190 Million
On July 30, 2021, Baird filed a lawsuit in the U.S. District Court, eastern Virginia over a data breach claim. Morgan and Morgan teamed up with another Baltimore law firm to file the suit which it hoped would be a class action suit against Capital one. According to CNET, Page Thompson hacked the company’s cloud computing systems, accessing over 140,000 social security numbers, 80,000 bank accounts and personal details of Capital one customers. The hack remained undiscovered for four months, but once it was, hell broke loose for Capital One.
The plaintiffs claimed the bank should have implemented stringent measures to prevent the cyberattack. Capital One tried to make amends, saying it would reach out to the affected parties, and the CEO, Fairbank, insisted he would make things right. However, the only way to settle the matter was for Capital One to reach deep into its pockets and fork out $190 million to compensate affected customers. Furthermore, it was fined $80 million.
3. CFPB v. Capital One – $210 Million
The Consumer Financial Protection Bureau (CFPB), founded in 2011 celebrated its first anniversary with a win under its belt. The federal regulator focuses on protecting consumers against financial threats, and hidden or excessive fees did its job and the enforcement action against Capital One was its first. In the action against Capital One, CFPB claimed that the bank had tricked its customers into buying add-on services such as credit monitoring and payment protection which were quite costly to the customers.
The regulator monitored the bank’s operations by stationing its employees at Capital One’s headquarters. The CFPB staff observed how Capital One’s call center workers tricked the customers into buying services they did not understand or would ever use. Although Capital One denied the allegations, it still agreed to settle the issue by paying around $150 million in restitution to 2 million customers who bought add-on services between August 2010 and January 2012. The financial institution was also fined an extra $60 million; $35 million was paid to the Office of the Comptroller of Currency (OCC) and $25 million to the CFPB.
2. FinCen v. Capital One – $390 Million
Private Equity Litigation published that Financial Crimes Enforcement Network (FinCen) assessed civil money penalties amounting to $390 million. The assessment was on January 25, 2021, following violations of the Bank Secrecy Act (BSA). FinCen discovered that while Capital One ran its Check Casing Group (CCG) Unit, the bank did not report suspicious transactions worth millions of dollars.
Capital One established CCG in 2008 after acquiring a few regional banks. However, regulators warned the bank of money laundering risks involved with the CCG and after internal assessments were carried out, the conclusion was that most customers were at high risk of money laundering. By the time Capital One decided to shut down CCG in 2014, the damage had been done. Thus FinCen found that between 2008 and 2014, Capital One had negligently and willfully violated the law.
The bank admitted to willfully failing to implement an effective Anti-Money Laundering (AML) program to prevent money laundering. Furthermore, Capital One acknowledged that it did not file Suspicious Activity Reports (SAR) despite being aware of the criminal charges against some of its customers. As a result, FinCen slapped Capital One with a hefty fine of $390 million.
1. Laurie Vignaud v. Capital – $38 Billion
On February 27, 2018, Vignaud filed a complaint against Capital One. She had worked at the bank for almost twenty years before being fired for expressing her opposition to the bank’s practices. As a senior vice president of the bank’s South-Central market, Vignaud had personal knowledge of the attitude of the bank towards minorities. Since Vignaud knew the bank was violating the law, she talked to the management severally regarding the issue. She was eventually let go and sued the bank for $1 million.
However, she was later named in a class action $38 billion federal lawsuit against the bank. The plaintiff counsel Benjamin Hall claimed that Capital One made a $180 billion pledge to the minority communities. The pledge was contingent upon the bank acquiring ING but immediately after the transaction went through, Capital One disregarded the pledge. Hall said that $38 billion belonged to the minority communities in Texas. According to Defender News, Capital One moved to dismiss the case.