Short answer
Capital One is the credit card issuer most likely to sue in order to collect, and its own settlement letter says it will report a settled account to the credit bureaus as settled with an outstanding balance. Both of those facts should shape how you handle a Capital One debt.
Key points on this page
- Capital One is quick to use the courts to collect on delinquent accounts, more so than other card issuers.
- If your debt is mainly with Capital One, bankruptcy protection is worth serious consideration.
- Item 9 of the Capital One settlement letter states that if the account is settled before charge off, the remainder of the balance is charged off and the account is reported to credit reporting agencies as settled with an outstanding balance.
- Item 8 of the same letter states that forgiven principal of 600 dollars or more is reported to you and the IRS on a 1099-C. A balance that has been forgiven and settled by agreement is not an outstanding balance.
- Reporting a balance that is no longer owed falsely characterizes the trade line and skews debt to income and utilization figures, which can affect approval and interest rates on later loans.
- The coupon or free gift in a Capital One collection letter is a collection ploy to get you to call. Since this page was published, the reporting problem on settled accounts is being addressed through disputes with the credit bureaus.
My experience working with financially-challenged consumers and their creditors nationwide since the economic downturn reflects that virtually every national issuer of credit cards, even larger regional credit unions, have gone as far as they can to assist their struggling account holders. Capital One is an exception to this. How Capital One goes about settling a debt with you, their treatment of credit reporting after agreeing to reduce your balance, and the fact that they are the most likely to sue for collection, all combine for one huge exercise in caution and awareness.
Credit card issuers offer plans to reduce interest rates on credit cards through hardship plans, debt management plans, credit counseling plans, or offer balance concessions through debt settlement, which go a long way in helping their customers avoid bankruptcy. In this way (credit card payment concessions), Capital One is not all that different from other credit card banks.
Capital One, in my Experience, is Tough to Work with
Banks who are paying attention know that working out some type of arrangement with account holders, who will otherwise be forced into filing chapter 7 or 13 bankruptcy, is in their best interest. Creditors will generally offer fair concessions as a final option because they will lose the least. For more about this see: Banks Choose to lose the least.
I am not sure Capital One is paying attention.
Capital One is quick to use the courts in order to collect on delinquent accounts. They would apparently rather their account holders file bankruptcy.
I continue to encourage seeking bankruptcy protection if your debt is mainly with Capital One.
Now we have Capital One choosing to be spiteful, and perhaps illegally, with those few credit card holders they may offer fair concessions to. To see the collection letter referred to below in its entirety: Capital One Collection Letter
The coupon for $50.00 you will see in the collection letter linked above is not all that new a twist to get a delinquent CapOne credit card member to call MRS Associates (a debt collector). It is worth noting however, it is only a collection ploy and nowhere near worth taking advantage of the perceived “FREE STUFF”. The main problem I want to draw your attention and provide awareness to, is number 9 on page 2 of the collection letter.
9. Credit Reporting of Your Settled Account. If your Account is settled before it is charged off, the remainder of your Account balance will be charged off. We will then report your Account to credit reporting agencies as settled with an outstanding balance.
Fair Credit Reporting Act (FCRA) and the requirement to report only complete and accurate information to the Credit Reporting Agencies (CRA’s)? This would FALSELY characterize the trade line and SKEW any later debt to income and/or utilization formula rendering them inaccurate as well. This means that Capital One could be causing consumer’s damages post debt settlement, when they are applying for future loan products whose interest rates and even approval will be factored on a credit report that contains erroneous and false information.
Reporting a balance still due and owing when it has been forgiven would falsely characterize this trade line in your credit report. How do we know the unpaid portion of the settlement is forgiven? Let’s look to number 8 on page 2 of Capital Ones collection letter:
8. IRS Reporting of Debt Forgiveness. If we cancel or forgive $600 or more of principal on a debt you owe, we must provide a 1099-C tax form to you and the IRS. Please consult your tax advisor and the instructions accompanying your tax forms for more information.
How can number 8, indicating the required reporting of forgiven debt to the IRS, comport with erroneously reporting an outstanding balance when it has:
- Been forgiven
- Been settled for a lesser amount agreed to by both parties, thereby leaving no “outstanding” balance
If you have a Capital One story to share, especially as it relates to improper credit reporting, I invite implore you to share it in the comment section below.
UPDATE: Since publishing the above Capital One article about credit reporting and settling Cap One credit cards a couple years ago, some softening of options available to account holders who fall behind has occurred. We do still see the poor credit reporting policy on settled accounts with Capital One, but have also seen how that is getting addressed using disputes with the credit bureaus.
If you are serious about resolving unpaid credit card debt with Capital One and have other credit card debts to resolve, it is important to prioritize accounts and target the best savings with the available money you have and can project saving up in the short term. If you have an experience with Capital One collections, credit reporting, or lawsuits, please share in the comments below. If you have questions about how to handle debts with Capital One, post in the comments for feedback.
Recently found out that I owe $750 to a closed Cap1 credit card, that I neglected years back. It of course is in the collection state.
This is the only debt I have & want to get it taken care of ASAP.
I have moved around so much, & forgot to check it, the balance jumped & closed the account without any thought from my end.
I called them today after normal hours and the rep asked that I call her back tomorrow or Monday.
Any advice?
Matt – Settling a Capital One account in collections is fairly simple. How long ago was it that this credit card last received a payment? Do you know who the account is out to collections with? Is anyone other than CapOne reporting this on your credit?
Mr Bovee, I have already been charged off by Capital one and First Source( their collection group) contacted me and I made payment arrangement with them in 2011. I was supposed to pay $50.00 a month for 47 months. After paying for 13 months it only reflected i made 3 payments. I contacted them and told them I would send more because I felt they were cheating me. Love, beal and nixon bought the debt and sent court papers for me to answer to the court about the debt. I sent the money order and all the letters to the court. I never heard a word until August of this year and the court sent a letter in regards to it setting dormant for over a year. I went to court and the day of I received a letter from Love , beal and nixon dismissing without prejudice. Sir I am now being sued again by Capital one. I really tried hard to be honest and pay them, but they made it impossible with the late fees and interest. Is there any way to get them to settle with us now? Thank you Charles Foster
Charles – You can settle when sued, or at any stage of collection. It sounds like the case was dismissed already. Were you sued again? If you can clarify what the disposition of the account is today in a follow up comment, I can offer some feedback about settling the Capital One debt now.
Hey, everybody! I got some great news that can hopefully help some of you struggling with Cap One. I just got a hardship program with them for zero APR.
Office of Executive Resolutions @ Capital One
1-800-955-1455 Monday through Friday from 8:30 a.m. to 5:00
p.m.
Good luck to everybody! Hope it works out as well for you as it did for me.
Hello Michael
I have a Capital One credit card balance 16,000 , lost job 21 months ago , wife stay at home mom ( we are both looking for employment ) and unemployment ran out
I have been told that the account charged off 8/13 I would like to settle with money from 401k
but they want upfront money payments for 10 years and a mark on my credit till paid of 10 years
I told them I would pay 70% almost 50% of that upfront and payments but the account needs to read currant after they received the upfront 50%
they said they can not do that.
should I just pay and deal with it and try to pay off faster
or should I hold out for lower settlement or credit report change to currant
John – You have no shot at Capital One agreeing to accept payment and bringing the account current. In fact, now that the account is charged off, it is going to stay there for 7 years from the date of charge off (not 10 years).
You can often settle with Capital One for 50% of the balance, either directly or through a debt collection agency they place the account with. Given what you shared about how prepared you are with funds to settle, I would be aiming to get Capital One to agree to the lowest offer they accept based on today’s trends (I see very few under 50%). I would not continue any discussions with them about the willingness to make any monthly payments. That is not conducive to your negotiations, and not consistent with your credit report concerns. In other words, getting this debt fully behind you will be better – all things considered.
Are you currently speaking directly with Capital One recovery in your efforts, or is there a third party debt collector involved? If a third party, who?
Hi,
I am being sued by capital one. I just recently found out they served my ex-husband. He just mentioned it to my son, so I don’t know if it was a day, week or month ago. I am not able to answer the summons because I don’t have it. Should I call the attorneys listed on the lawsuit? I was able to look it up, but could see no details. I do owe the debt, and would like to make payments, but I fear they will just get a judgement and empty my account and/or garnish my wages.
Erika – Is the court Capital One sued you in close by? You can go to the court and get a print out of the lawsuit, and also look at the date the process server says they served the complaint. Post an update with what you learn.
You can call the attorney Capital One hired to set up payments. But it would be good to know if they already have a default judgment before you do that, as my feedback would be little different.
Also, what is the amount of the suit? What can you afford to pay monthly?
Michael,
Well, I received a summons today. I have 20 days to answer. The amount is $2142.00. I’ve heard that Cap 1 is merciless. I could make payments. I am currently paying one other @ $150 per month. They accepted payments but still got the judgement. I would like to make payments, but how to I avoid Cap 1 from still getting the judgement?
Erika – Once sued, you can often set up payments, but that will often only occur if you sign a stipulation of consent to judgment. In order to avoid any of that you would want to come up with a lump sum settlement. What are the chances you can come up with say 70% of the balance?
Michael,
I’m not sure about 70%. 50 – 60% could be do-able. It will cause me to fall behind on my utilities and rent, but I think I could work out partial payments on both of those. Do you think I should call and offer $1000? That is just under 50%. I’m looking at it as a starting point. I will hope for 60% which would be $1285.
Erika – I have worked on many files like yours over the years. I would not forgo paying your rent and utilities over this in order to settle with Capital One. I would opt for discussing a monthly payment with the law firm collecting. You can call them and ask what a payment plan could look like. Let them know you are already paying on a judgment. Do not go into particulars of it, just that you have a judgment, and are paying it, and cannot afford much monthly. You can ask at the same time what a settlement might look like in case you can borrow from a family member (even if you have no intention of borrowing), and see what that might look like.
Post an update with what you learn and lets go from there.
I thought I would post an update on my dealings with Cap 1. After receiving a summons I contacted Capital 1 to try to make some kind of payment arrangements. Well, they would not even discuss it unless I provide my SS number, place of employment, and annual salary. I refused because I felt they were just going to get a judgement and go directly to garnishment. I felt I did not need to provide this info, even though my place of employment and annual salary would be very easy for them to find. I proceeded to hire a lawyer. He is charging a flat fee of $2500. There has been a slew of paperwork back and forth but as of yet, no court date or determination. He says he has dealt with Cap 1 several times and they fight, but he has never lost against them, so I’m hoping I won’t be his first.
Erika – I applaud your tenacity! Not everyone is going to invest in the legal help you have in order to stand up tall on principle when that same amount would pay the bill. Please post updates with how this progresses for you.
What is your thought process on CAP 1 now, how r they working with negotiations?
Charles – Negotiating with Capital One to reach a settlement prior to charge off goes to the wire. When settling direct with Capital One it typically occurs in the last week or two before charge off. Most settlements with them are occurring after they send the account out to a third party collection agency. Realistic targets are still 50% of the balance at the time of settlement. If the account goes to an attorney collector – a little higher.
I have a cap1 card that I have had for at least 10 years now. I am having a very difficult time paying the high interest and getting nowhere fast. When our Obama announced that he was going to cap credit card interest, they upped it to 14.9 %. I will never get this paid. I am on disability and just now getting student loans paid off. Any ideas how to deal with them. I am LOST.
What is the balance? Do you have other credit cards besides the Capital One account? If so, what are those balances and interest rates? How much do you owe on the student loans? What are your payments and interest on those?
Hi, Michael! This is my first time asking for help with Cap 1. I have three cards with them now. Two are cards from other banks that were recently sold to Cap 1; I had those accounts for years. I’m hoping to get hardship programs with the two transferred accounts only. The Cap 1 account I’m not asking help with is only a year old. Hope that might be useful info! Jenny
..Cap 1 won’t work with me. Sorry for the typo!
Jenny – Have you been on any other payment plan arrangements with Capital One in the past? If so, when was that? How long have you had your Capital One credit card?
Any updated tips for Capitol One? All my other cards are giving me hardship programs, but Capitol One work with me. Thx!
I have a similar issues with Capital One. I was told that my account was settled and would not interfer furthure with my credit after I made a lump payment of $900. This however is not the case and they are still reporting that I owe them over $1100. I don’t know what to do. This is now keeping me from getting a mortgage.
Rebecca – Do you have a letter showing that the account has been settled? Do you have the ability to prove you made the payment by the date that was set up for the settlement amount (bank account statement, other)?
Post your answers in a comment reply and lets go from there.
The original charge off entry on your credit report put there by capital one is not going anywhere using a pay for delete strategy – even if you pay it off in full rather than settle the account.
If the account is with a debt collector, but still owned by capital one, you will likely have to deal with the debt through the debt collector. Is there a collection trade line separate from Capital One (but about the Capital One credit card account) appearing on your credit report?
What is the name of the collection agency currently trying to collect on the CapOne debt?
I am not sure what and where you are reading about pay for deletes. The fact is, pay for delete is not what it is made out to be by many of the sites that talk about it. It is not done with original creditors like Capital One. It cannot be done through an assignee of the creditor (a collection agency collecting on behalf of your original lender), as they have no ability to remove something they did not put there.
About the only legitimate shot you have at a pay for delete is with a debt buyer who makes their own negative credit reporting entry that is totally separate of the banks charge off reporting. A debt buyer removing a negative entry, or not responding to a dispute investigation you file with a credit reporting agency (which would cause the item to be removed), has no affect on the charge off that Capital One made. Pay for deletes with debt buyers are just not common.
Pay for deletes are not an urban legend, but they are getting to that point.
I’ve had a cell and a few different cars all stayed in good standing, cable and nymo. I was just thinking that the charge off being there were automatic decline. Obviously i have to pay them, but i didn’t know if i should deal with capital one or the agency or i dont have a choice. i dont know if there is a def. way to get the pay for delete thing i keep reading about
It sounds like you are trying to get new credit and are being turned down based on items on your credit report.
Capital One is reporting a charge off for an unpaid accounts from 2007. That’s 5 years old and would generally be considered pretty stale.
If there are no other negative items on the credit report, what types of recent positive items are on your credit? Mortgage, car, other unsecured accounts?
What is your goal with Capital One account? Are you contemplating contacting CapOne to settle the debt?
After this long, you will likely (not always) find you will be forwarded to a debt collector working for capital one.
I am in shock I was not aware of the CFPB, have been in credit report for 2 years with Lexington Law, Cap 1 has 4 negative items on my CR 6 ACCTS all together 2 i accepted that they were mine. The 4 they have on there are for over 6, 000 dollars. They have been sent 4 rounds of validating these accts as mine. There is no acct # no Credit limit no dates no payment history. In response to getting them to prove there mine CAp 1 has sent me several letters requesting my personal information. These negative accts have cost me such a loss my score plunged with these negative items I have a card with them from Orchard bank that was a $300 limit after about a year of requesting CL INCREASE ONE DAY GOT A EMAIL THEY GAVE ME A cli of 3200 dollars. They will not approve me dor any card, I closed 1 account i had with them and an unable to see my statements. So I keep my card with them I do not carry a balance. I received 1 letter from then addressed to me but the the letter was to some Chinese Restaurant. Lexinton law said I would probably have to go to FTC or my state ATTORNEY stringing I MOST PEOPLE GIVE UP AND PAY. I have records back to 2011 and no late payments They reined my credit Lexington law took advantage of me by stringing me along, continuing I do not believe in disputing CC AND BANKS do what they want they refuse to give me or anyone else any info on these accts. Will fight for the fact these are not my accts. THANKS Jene Pitsenbarger
You may want to check out this post about filing your complaints with the CFPB.
Post an update with what develops.
I have a $400 charge off with cap one haven’t contacted them at all yet. I’m trying to figure out the best starting point.(From 2007)I’ve tried a few other credit lines and it looks like the charge off is the issue that is getting me declined.
Wondering if anyone has had any success getting Cap1 to remove the erroneous info after settlement.
If by erroneous you mean getting them to remove any reporting that shows a remaining balance owed after a settlement was agreed to and terms met, yes. There is a fairly painless dispute process to follow. If it is not fixed on first response, you would typically send a second reinvestigation request. If it is not corrected following that, you have additional options to explore.
This is something of a passion for me. If you would like to connect off line, my time is available to you at no cost.
I will send you an email. Reply to that if you would like to coordinate a time to speak.
Hi my husband paid an outstanding loan off to debit task last year. He then got a letter saying the account was closed and completed. After wards we found out after applying for a mortgage that an outstanding amount was owed and the loan did not show c for closed and completed. Is this grounds to get this removed? He still has the letter saying the account is settled and closed it never mentioned outstanding amounts
Lee
Your email suggests you are in the UK. Are you dealing with debt or a mortgage in the UK or in the US?
Hi Jen,
Reporting a balance due when it is agreed through settlement that no remaining balance is in fact legally due is likely a violation of the FCRA.
To take CapOne to task on this you will have to first follow through with the settlement, then verify that they are reporting incorrect information to the bureaus followed by disputing the information with both CapOne and the reporting agencies.
If the incorrect information remains, you have the option of pursuing them in federal court for the violation. You can continue to be damaged by their reporting a phantom balance as due with paying higher costs for credit products in the future. Your actual debt to income will be skewed by the continued misrepresentation of a known inaccuracy.
If I were personally in your very shoes given the limited detail you shared in your comment (thanks for leaving one by the way), I would follow through with the settlement and take care of the reporting afterward.
Waiting for the debt to be placed after charge off is a plan, but may not be the best one.
What is the settlement you have currently? Can a similar deal be struck with a collection agency or worse, an attorney the account is placed with?
I cannot say until the account lands in the next lap.
CapOne plays so many monkey games that are totally unnecessary. Your comment reflects that. I am not sure who is in charge of developing and infusing company culture over there, but in my opinion they need to be replaced.
Capone will pay assignment costs and fees on any settlement you later agree to, so money now is better than what they get later.
Please come back to the comments and let me know what you decide to do and how the situation develops. If I can assist you in any way, I will.
Best of Success!
I am currently dealing with Capital One and my ‘settlement offer’ contained the verbage of both 8 and 9 above. I had my cashiers check in hand today, and I actually went to the post office and overnighted it, when I came home I decided to google the verbage “settled with an outstanding balance.” to see what came up as this verbage bothered me from the beginning of my dealings with the Cap One rep. He would not put the verbage as settled in full as did my Discover Card. I, luckily was able to retrieve my overnight package, and therefore I will likely go to charge off but I dont think charge off will be any worse than paying the settlement only to have them sue me and add late fees to the balance that i thought was settled.
As a side note, Wayne, my CapOne rep gave me a very hard time about faxing me a copy of the agreement for the longest time. And then once he finally agreed last week, he, in trying to force me to pay via check over the phone, tried to tell me that oh the faxing department may not get to it til Tuesday or Weds and if you don’t pay by Weds, the agreement is null. So many times he told me I just don’t understand why you don’t trust us, you’ve paid us via your Checking account for 10 years, you know, the one we have on file… XXX I was adimate that I would be overnighting a cashiers check. At first he told me this was not an option. I told him I closed that account… which I did on Monday so that they couldn’t help themselves!
So this is where I am now, I did not mail the settlement check because I do not feel that verbage in the agreement is in my best interest.
You raise a number of good points that will be fascinating to get answers to. I can’t wait to see what you uncover here.
Steve
The Star Tribune Published a list of the top 15 companies garnishing Minnesota residents over a 5 year period today.
No surprise that Capital One is at the top of the list, even beating the second place companies in both categories by nearly double.
https://www.startribune.com/investigators/101723943.html?elr=KArks:DCiU6:5DiaPQEacyiUiacyKUUs
There is a really good article from the Tribune today that tells the story of those who are garnished, even when their money in bank accounts are exempt from levy, or who did not even legally owe the debt.
https://www.startribune.com/investigators/101723868.html?page=1&c=y