“Dear Steve,
I was always under the impression that banks are required to charge off debt at 180 days. Just about every issuer does this and account balances dont seem to increase much more from that point with the exception of Capital One, I have found that Capital One balances increase almost 50% within a year of default. I am curious how Capital One is legally able to not charge off bad debt and continue to charge excessive fees, penalties and interest?
Can you shed any light on this Steve?
Best,
Angelo”
Dear Angelo,
The charge-off function confuses many people. They believe that a charge-off alters the underlying terms of the debt. It does not. The best way to think of a charge-off is as an accounting requirement. After 180 days delinquent the bank can no longer report that account as a good performing account on their books. This reporting function is actually an outgrowth of the S&L crisis of the 1980s when S&Ls held horrible debt on their books and masked the true condition of the institution.
As a matter of practice credit card companies in the past would bundle all their charged off debt in big lots and sell it soon after charge-off. Some money for that junk was better than trying to collect it and get little. However there is no requirement I am aware of that requires Capital one or any bank to have to sell the debt. And if the bank held onto the debt, the multiplier of fees, penalties and maximum interest can make the balance rocket.
I just so happen to have a Capital one application in my hand so let’s use that as an example. And let’s also assume that once the card went delinquent that the bank ratcheted the limit down to the balance, which generates over limit fees.
So if the balance began at $1,000 at the end of 12 months with fees and interest the balance would be just about $2,200. If the initial balance was $4,000, at the end of 12 months it would be about $6,200.
Little calculator I made to figure this out.
If the bank has already taken the reporting hit and is willing to hold-on to the debt and feels that approach will be more profitable for them, as far as I am aware, they certainly can.
The charge-off conundrum is very similar to the statute of limitations brain twister. Many people think that debt past the statute of limitations can’t be collected. In fact it can be attempted. The statute of limitations only limits the creditors options to sue you, not their ability to collect.
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This issue needs national attention!Â
That’s the only way Cap One will stop, if their blood sucking reputation damages their bottom line.Â
I can’t even watch a Cap One commercial on TV without wanting to vomit.
I hope to bump into Jimmy Fallon one day….
Had not seen you around in a while. You were missed.
I received a check that I thought was good to do some work. I followed the instructions to cash the check and do what was requested of me. The check bounced and now the bank expects me to pay them almost 2,000 dollars. Is there anything I can do? I do not have that kind of money.
I’m sorry to say that it sounds like you got caught in a scam that[‘s going around. If you cashed the check, what happened to the money you received?
I received a check that I thought was good to do some work. I followed the instructions to cash the check and do what was requested of me. The check bounced and now the bank expects me to pay them almost 2,000 dollars. Is there anything I can do? I do not have that kind of money.
Experience varies.
Even the 3rd parties they assign accounts to complain about capone.
Settlements get done, but the gymnastics required are unnecessary and stupid.
CRN filed complaints with the OCC last year (their primary regulator) in order to resolve some issues. That is how far we had to escalate things in order to put the matter to rest. It worked out in the end, but that should have never been necessary.
I’m curious, what’s your experience with them in states where liens and garnishments are not as easy?
Andy, I said something similar yesterday in response to a comment to a CapOne article I wrote last year:
“CapOne plays so many monkey games that are totally unnecessary. Your comment reflects that. I am not sure who is in charge of developing and infusing company culture over there, but in my opinion they need to be replaced.”
ahhh, good one, who’s the witty dude now?
This happens for the same reason rock stars date models, because they can. 🙂
Angelo, Cap One has been a hot mess for us up here in MA also. It seems most MA Cap One accounts go to one particular law firm up here (i’m leaving the law firm’s name out, in fear of retaliation, we talk with them every day) and they are very tough. They are very fast to sue and when they get a judgment they slap a lien on any property quick, and then nobody hears from them until it’s time to clear it up. By then yes, the balances have grown by as much as 200% of the original balance.
I wish that Cap One and BOA would go have lunch together or something, maybe BOA could rub off on Cap One little.
Well look at it this way, a debt that runs up quickly on fees and interest, generates more cash, for doing nothing. It might not seem fair but it is legal and brilliant for generating revenue from nothing.
I understand, but how can that be legal? How can balances continue to increase with no limits? If the consumer cannot afford the original balance how can they be expected to afford a 100% increase in balance followed by a lawsuit? Sounds like extortion through the legal system to me.
I understand, but how can that be legal? How can balances continue to increase with no limits? If the consumer cannot afford the original balance how can they be expected to afford a 100% increase in balance followed by a lawsuit? Sounds like extortion through the legal system to me.
Well look at it this way, a debt that runs up quickly on fees and interest, generates more cash, for doing nothing. It might not seem fair but it is legal and brilliant for generating revenue from nothing.
Angelo, Cap One has been a hot mess for us up here in MA also. It seems most MA Cap One accounts go to one particular law firm up here (i’m leaving the law firm’s name out, in fear of retaliation, we talk with them every day) and they are very tough. They are very fast to sue and when they get a judgment they slap a lien on any property quick, and then nobody hears from them until it’s time to clear it up. By then yes, the balances have grown by as much as 200% of the original balance.
I wish that Cap One and BOA would go have lunch together or something, maybe BOA could rub off on Cap One little.
This happens for the same reason rock stars date models, because they can. 🙂
ahhh, good one, who’s the witty dude now?
Andy, I said something similar yesterday in response to a comment to a CapOne article I wrote last year:
“CapOne plays so many monkey games that are totally unnecessary. Your comment reflects that. I am not sure who is in charge of developing and infusing company culture over there, but in my opinion they need to be replaced.”
I’m curious, what’s your experience with them in states where liens and garnishments are not as easy?
Experience varies.
Even the 3rd parties they assign accounts to complain about capone.
Settlements get done, but the gymnastics required are unnecessary and stupid.
CRN filed complaints with the OCC last year (their primary regulator) in order to resolve some issues. That is how far we had to escalate things in order to put the matter to rest. It worked out in the end, but that should have never been necessary.
IÂ don’t think it is legal. I can’t find the statute or reg in the CFR, but my understanding is that banking regs require a credit card to be closed after 180 days with no payment. If that is the case with your account and they have not closed it (charged it off) and are still applying late and overlimit fees that sharply increase the balance, you may have recourse. It would be worth looking into. In my case they refused to work with me when I lost my income, and they more than doubled the balances with those fees. When they sued me, I not only defended but because I know TILA very well, and I had found numerous violations after reviewing years of my statements, I countersued them. I actually won monetary damages at first, but it was not enough to offset the inflated amount they jacked my balance to, so I found even more violations and appealed with an even higher countersuit. They then folded, and dismissed with prejudice.
That would make one hell of a class action, CapOne has been doing this for years.  Are you an attorney?  We should talk.  For consumers who enrolled CapOne accounts into my settlement program I would put their CapOne cards into a DM plan to delay default until we settled all other accounts and then settle the CapOne last and when the funds were accumulated.  It worked well, less lawsuits and better settlements but for those who couldn’t afford to do that we tried to knock out the CapOne first. I think the characters CapOne uses in their TV commercials are also used in their collection department!