Capital One faces class action over transfer balance program

Posted on: December 22nd, 2011 by Steve Larson

A group of consumers have filed a class action lawsuit against credit card giant Capital One claiming the company lures consumers into transferring large balances with promises of interest free money, but engineer the offers’ details to allow the company to charge interest rates exceeding 13%.

The case alleges that Capital One deceived cardholders by claiming that a cash advance obtained through the company’s transfer balance program would include a zero percent annual percentage rate, or APR, for one year.  At the same time, the company allegedly promised consumers’ credit balances through credit cards and other lines of credit covering regular purchases would not gain interest as long as the balance was paid within 25 days.

However, according to the complaint, cardholders who took advantage of the transfer balance program were charged interest rates exceeding 13% for purchases made through credit cards and other lines of credit, even if the balance was paid on time.

The lawsuit claims that Capital One strategically and improperly applied payments to the transfer balance rather than to consumers’ credit, also known as the purchase balance.  This caused many consumers to be charged for the remaining balance at interest rates exceeding 13%, even if they paid off their purchase balance on time.