A lawsuit accusing Capital One Financial Corp of increasing the rate over double the actual one has been reinstated by the U.S. federal appeals court after it buried the details about raising the rate in fine print.
The 9th U.S. Circuit Court of Appeals said that Capital One did not show clear and transparent disclosures regarding the cardholder’s annual percentage. It was a 2-1 ruling made in San Francisco when Capital One raised the interest percentage to a whopping 15.9 percent from a ‘fixed’ 6.99 percent although she had not done anything to deserve the action.
Judge Betty Fletcher further clarified on the point of transparency being neglected by stating that when the creditor ahs stated that the rate of interest is ‘fixed’ then changing the APR for any reason is not justified.
The judge was also heard to say that the disclosures made were not in a manner that can be noticed easily or understood by customers. This is following a lower court’s dismissal of the case brought by Raquel Rubio and it has stated that Capital One which is the largest issuers of Visa and MasterCard to consumers has been breaching the Lending Act and California unfair competition law.
Rubio’s lawyer Behram Parekh also said that having the word ‘fixed’ in the agreements was misleading to many consumers and the card company was changing terms at their own discretion. This victory is significant as there are numerous other lawsuits pertaining to such issues and could have implications for the card industry.
This case was brought up by a Los Angeles resident Rubio on behalf of multiple cardholders and the case was taken to district court for further discussions.
Capital One based out of Virginia has stated that it will fight the decision in court and will not agree to the decisions made by the judge.
According to the ruling there had been a mail solicitation from Capital One in 2004 that was accepted by Rubio where a card was offered at an interest rate of 6.99 percent.
There was also a statement that said that in the event that Rubio missed a payment or crossed her credit limit there could be an increase in the interest rate but in a smaller type on the same page it was also written that the agreement could be subject to changes at any point of time and Capital One has authority to do so.
The hike in interest rate came unwarranted as Rubio has not missed any of her payments or crossed over her set limit. This made a situation called “Hobson’s Choice” where she could choose between cancelling her card or use it at the increased rate of interest.