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Capital One Accused of Dishing Out Low Blows

What would you do for a whopping $1.00 of new credit from your credit card issuer? Hmmmmm...let me see—nothing? You certainly wouldn't agree to move old charged-off debt to a new credit card just so you could start making payments and paying interest again, right? That would be absurd!

That is, unless you were tricked into doing so.

Well, Capital One has allegedly found a way to dupe some unaware consumers into entering such a debt repayment plan by sending them solicitations disguised as offers for new credit cards. West Virginia Attorney General, Darrell McGraw, stated in a press release on January 22nd that "Consumers who had charged-off accounts with Capital One or other creditors were sent the offer, which required the consumers to agree to transfer the entire account balance of a charged-off account to a new credit card account to receive $1 of new credit from Capital One.

"I haven't seen a copy of what this alleged offer looks like, but it's got to be rather deceiving to convince any rational consumer to do such a silly thing. I can only imagine how masterfully hidden among many pages of fine print is the fact that you will actually only receive $1.00 of additional credit when you agree to the terms of the offer. In addition, those who accepted were required to immediately begin making payments on the old charged-off debt before they could receive further increases in their credit limits.

According to McGraw, "Capital One's practice of offering nominal extension of credit, if and only if, the consumer agreed to pay off a debt too old to be sued on is tantamount to loan sharking." At the same time, acceptance of the terms allowed Capital One to re-age the debts, thus restarting the clock on the statue of limitations while also charging interest and fees on debts that otherwise would have been untouchable.

Rest assured credit issuers will be dishing out their fair share of above-the-waist blows in 2010 as they seek to recuperate lost revenue due to CARD Act of 2009. And taking actions such as raising interest rates or cutting credit limits on customers who are late on payments are fair, above-the-waist blows in my book. However, this alleged behavior by Capital One is essentially like dishing out a clean shot to the proverbial consumer groin—definitely a low blow! If you receive any correspondence offering what appears to be terms for new credit cards, be sure to read the fine print carefully and understand exactly what it is you're agreeing to before making any quick decisions. And always keep in mind that if it appears too good to be true, it probably is.

Credit card companies are "for-profit" businesses and are certainly not in the business of giving away free money.

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Joshua Heckathorn's picture

Joshua Heckathorn was President of Creditnet, is a credit expert and has been featured on CNNMoney, FOX Business, Yahoo Finance, The Street, and many other national publications during the past ten years.  He received a Bachelor of Science in Management (Finance) from Brigham Young University's Marriott School of Business and earned his MBA from Seattle University.

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