Around 18,000 customers of Capital One Financial Corp. will receive reimbursements totaling $775,000 in annual credit-card membership fees after the Office of the Comptroller of the Currency (OCC) deemed them as unfair.
Capital One was found to have unjustly billed 3,400 cardholders $125,000 in annual fees even after they have closed their accounts from 2004 to 2006. The bank acknowledged the error and fixed the problem in 2006.
According to a bank statement, the discrepancy was a result of a technical problem, which was fixed after Capital One converted its transaction processing system four years ago.
The bank also expanded the refund to include 15,000 more customers they also discovered to have been wrongly charged.
Most of these customers, they said, did not even know of the error and had paid the annual fee. The bank said it only reimbursed the fee to those who complained.
In a statement, the bank said it regretted it not having proactively reimbursed all the customers who were affected. To resolve the case, Capital One said it was tracking down all their former cardholders who paid the annual fee and reimburse it.
Lenders had shelved annual fees as it turned away customers. Today only 20 percent of all banks in the U.S. charge annual fees. But as the CARD Act takes effect on Monday which places new restrictions on interest rates and overdraft fees, issuers have begun charging annual fees again to make up for lost business.
Citigroup has sent letters to cardholders that said it will charge $60 in annual fees for purchases up to $2400 during that year starting on April 1.
However, financial regulators and the attorneys general have taken broad measures against these bank fees. New York Attorney General Andrew Cuomo prevented a retail bank of Citigroup to charge a fee for checking accounts, which were previously free. Cuomo said Citibank could not charge such checking account fees because the bank had not given enough clear notice to customers.
Before expanding into banking, Capital One was among the country’s largest monoline credit-card lenders. Capital One is currently the eighth-largest bank in terms of deposits. Early in the financial crisis, the bank sharply curbed credit card lending to make them turn out in considerably better shape than other banks despite its immense portfolio of nonprime card loans.
With deposits totaling $116 billion and loans reaching $90 billion, Capital One posted a $312 million profit in 2009 from a $79 million loss in 2008.