Capital One Case Throws Doubt on Disclosure Protections

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A lawsuit filed against Capital One by the Minnesota attorney general's office could weaken the liability protections credit card marketers derive from disclosures they provide to consumers in fine print.

On Dec. 30, Minnesota attorney general Mike Hatch sued Capital One, alleging that the company's advertisements -- including direct mail and TV ads featuring "rampaging barbarians" that market "No-Hassle" credit cards -- were false and misleading.

According to Hatch, the ads give the impression that the cards carry a low and fixed interest rate, when consumers can easily trigger a penalty that raises their interest rates by up to 400 percent.

"Capital One aggressively markets its brand image as the credit card company with the nation's lowest fixed rates," Hatch said in a statement. "But that image is false. If you do something as simple as pay a day late, your rate with Capital One can skyrocket overnight."

In a statement, Capital One said it cooperated fully with the attorney general's investigation. The company said it thought it acted properly and in full compliance with the law.

"Capital One regrets that the attorney general has chosen to proceed with this lawsuit but intends to continue to work with the attorney general's office to address the issues raised," the company said in a statement.

Penalties for late payments are not uncommon. Adequately disclosing the penalties in credit card offers has been sufficient protection. In the past, adequate disclosure has been defined as whatever language is necessary for an average person to understand the terms of the offer, said Andrew Lustigman, a New York advertising attorney and DM News columnist.

"Generally, companies should be in a position to change terms if consumers don't follow their end of the bargain," Lustigman said. "As long as it's clearly and adequately disclosed, I think that's fair."

Lustigman said he could not comment on the Capital One case directly. However, the case may show that disclosing the terms of the offers may not be sufficient to protect credit card companies from litigation, he said.

Scott Hovanyetz covers telemarketing, legal issues, production and printing and direct response TV marketing for DM News and To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting

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