California Cracks Down on Credit Card Debt Collection Practices

Credit One Bank has agreed to settle a lawsuit over the institution’s debt collection practices. District attorneys in California from Los Angeles, Riverside, San Diego, and Santa Clara counties alleged that the company’s methods for collecting debts weren’t appropriate, according to a recent American Banker report.

Credit card issuers can gain a valuable reminder about the importance of sound vendor management and following regulations surrounding debt collections from the allegations the district attorneys brought forth and Credit One’s decision to settle.

Credit One has agreed to pay $10.2 million to settle the nearly five-year legal battle, but it has denied that it violated laws or engaged in any wrongdoing over the matter.

“Credit One Bank has always complied with the requirements of California’s law as it relates to collection practices and honors all cardmembers’ requests to not be called,” the company said in a press release.

In its release regarding the settlement, Credit One Bank denied that it participated in any wrongdoing with regard to the allegations.

But the district attorneys involved in the case paint quite a different picture. They allege that Credit One or its vendors continued to reach out to consumers even after people had asked those parties to stop calling them. And, according to the American Banker report, these cases weren’t instances where people received an extra call or two.

One borrower claims that, over a span of seven months, they received 550 calls. 

“Credit card companies do not have the right to badger consumers and invade their privacy with nonstop phone calls to collect debt,” Nathan J. Hochman, Los Angeles County District Attorney, said in a news release. “We are sending a strong message today that companies will not get away with harassing consumers in our state.”

District attorneys alleged that vendors working in partnership with Credit One made at least a portion of the collection calls in question to borrowers, something credit card issuers and other companies that lend consumers money should take note of.

Many lenders turn to collection agencies to help them stay on top of borrowers who’ve fallen behind in credit obligations. Credit One’s settlement is a reminder to creditors that they can be held responsible for the actions of companies they partner with to carry out collections efforts. 

Credit card companies should thoroughly review the procedures of the vendors they work with to make certain those entities are following the law and not engaging in activities that could cast the card issuer in a poor light.

In addition to the $10.2 million Credit One is paying to resolve the matter, the bank may sustain reputational damage from the allegations.

Issuers who don’t do their due diligence on vendors could find themselves in a similar position as that of Credit One. The bank not only has to cough up more than $10 million, but its reputation likely took a hit as more people familiarized themselves with the allegations from the district attorneys.

For Credit One, any reputational damage they sustain may be as unwelcome as the amount the company agreed to pay to settle the matter. 

The bank has over $1.9 billion in assets and likely has money set aside for instances such as this. Credit One did not immediately respond to a request for comment from the CardRates team.