Efforts of State Attorneys General to Avoid Federal Court Jurisdiction Continue
On January 20, 2010, Darrell V. McGraw, Jr., Attorney General of the State of West Virginia, filed a Complaint against Capital One Bank (USA), N.A. and its corporate subsidiaries. In various recitations, the Complaint asserts violations of the West Virginia Consumer Credit and Protection Act, W. Va. Code §§ 46A-1-101 et seq. Notably, the Complaint was filed in the Circuit Count of Mason County, West Virginia, and expressly disclaims reliance on any claim which arises out of federal law for the stated purpose of avoiding removal to a United States District Court on the basis of federal question jurisdiction. This approach reflects a growing trend among state Attorneys General to frame complaints to avoid federal jurisdiction.
The Complaint is replete with asserted supposed violations of the West Virginia Consumer Credit and Protection Act, and includes the following significant allegations relating to:
- A “debt collection scheme” targeted at former customers. Under this scheme, the targeted consumer would agree (through the fine print contained in the application) to reopen collection proceedings on “charged-off” debt by accepting Capital One’s offer of a new Capital One credit card with no annual fee.
- The issuance of multiple “low-limit” credit cards to the same consumer rather than raising the credit limit on that consumer’s existing credit card in order to collect multiple late fees, over-the-limit fees, and membership fees from the single consumer.
- Attempts to collect over-the-limit fees when imposition of a late fee caused the consumer to exceed his or her credit limit.
- The marketing of a “payment protection plan,” which would purportedly pay the consumer’s minimum monthly payment if the cardholder became involuntarily unemployed or disabled, to those consumers who were already unemployed and/or disabled and were therefore ineligible to receive the benefit despite their continued payments into the plan.
- Attempts to collect membership and late fees on cards which were issued but never activated.
- The refusal to allow consumers to close accounts so long as there were unpaid balances remaining on the account.
- Attempts to collect fees for each month that the consumer’s account exceeded the credit limit, even if the reason for exceeding the credit limit was due to the fees charged by the company.
- Enforcing “unconscionable” cardholder agreements under which the credit limits were so low and the penalty fees so high that there was no reasonable probability that the consumers would pay the obligation in full once a single late fee was incurred.
In light of this lawsuit, along with the increased emphasis on consumer protection engendered by the recent recession, consumer lenders should now anticipate investigations and/or actions by state Attorneys General based on allegedly unlawful conduct and the impact of such conduct on consumer’s rights, as defined by both statute and common law. Troutman Sanders represents consumer lenders involved in these matters and is following these developments as they unfold.