Minnesota AG Hits Cap One With False Ad Charges

CHICAGO Minnesota’s attorney general has filed a lawsuit charging Capital One with false, deceptive and misleading marketing, including advertising and direct mail promotions.

The suit, filed in Ramsey County District Court, alleges the McLean, Va.-based company uses a “penalty rate” that causes its interest rate to increase should an account holder default. The suit alleges Capital One’s advertising suggests competitors’ interest rates will increase, while theirs has a “low and fixed” rate at 4.99 percent.

“There is no such ‘fixed’ rate on Capital One credit cards,” according to the suit. “Capital One increases the supposedly ‘low’ and ‘fixed’ interest rates of Minnesota cardholders through penalty rate repricing, and retains the right to do so through change-in-terms repricing.”

Similar language is used in direct mail solicitations and customer service scripts, according to the suit. The suit seeks injunctive relief and civil penalties.

“Capital One aggressively markets its brand image as the credit card company with the nation’s lowest fixed rates,” said Attorney General Mike Hatch 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.”

“Capital One has cooperated fully with the attorney general’s investigation, and believes it has acted properly and in full compliance with the law,” according to a statement from the company. “Capital One regrets that the attorney general has chosen to proceed with the lawsuit, but intends to continue to cooperate and work with the attorney general’s office to resolve this matter.”

The company last month moved its $175 million account to Omnicom’s DDB in Chicago from Interpublic Group’s McCann Erickson of New York, without a review [Adweek Online, Dec. 15].

The company’s most recent advertising has featured a group of marauders—representing competitors’ hidden fees— who become discouraged when they find a consumer is using a Capital One credit card. “What’s in your wallet?” is the tagline