Capital One 2012 Annual Report Download - page 282

CAPITAL ONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In addition to the mortgage repurchase litigations referenced above, in which one of the Company’s subsidiaries
is a defendant, the Company’s subsidiaries face indemnification risks from certain lawsuits brought by monoline
bond insurers and investors against third-party securitizations sponsors, where one of our subsidiaries provided
some or all of the mortgage collateral within the securitization but is not a defendant in the litigation. In those
matters where the Company has determined that losses from these matters are probable and reasonably estimable,
the Company has established reserves for these cases, which are included within the overall representation and
warranty reserve.
FHLB Securities Litigation
On April 20, 2011, the Federal Home Loan Bank of Boston (the “FHLB of Boston”) filed suit against dozens of
mortgage industry participants in Massachusetts Superior Court, alleging, among other things, violations of
Massachusetts state securities laws in the sale and marketing of certain residential mortgage-backed securities
(the “FHLB of Boston Litigation”). Capital One Financial Corporation and Capital One, National Association are
named in the complaint as alleged successors in interest to Chevy Chase Bank, which allegedly marketed some
of the mortgage-backed securities at issue in the litigation. The FHLB of Boston seeks rescission, unspecified
damages, attorneys’ fees, and other unspecified relief. The case was removed to the United States District Court
for the District of Massachusetts in May 2011. FHLB of Boston filed an Amended Complaint on June 29, 2012,
and the Company filed a motion to dismiss on October 11, 2012, which is pending.
SEC Investigation
Since July 2009, we have been providing documents and information in response to an inquiry by the Staff of the
SEC. In the first quarter of 2010, the SEC issued a formal order of investigation with respect to this inquiry.
Although the order, as is generally customary, authorizes a broader inquiry by the Staff, we believe that the
investigation is focused largely on the loan loss reserves for our auto finance business for certain quarterly
periods in 2007. We are cooperating fully with the Staff’s investigation.
Checking Account Overdraft Litigation
In May 2010, Capital One Financial Corporation and COBNA were named as defendants in a putative class
action named Steen v. Capital One Financial Corporation, et al., filed in the U.S. District Court for the Eastern
District of Louisiana. Plaintiff challenges our practices relating to fees for overdraft and non-sufficient funds fees
on consumer checking accounts. Plaintiff alleges that our methodology for posting transactions to customer
accounts is designed to maximize the generation of overdraft fees, supporting claims for breach of contract,
breach of the covenant of good faith and fair dealing, unconscionability, conversion, unjust enrichment and
violations of state unfair trade practices laws. Plaintiff seeks a range of remedies, including restitution,
disgorgement, injunctive relief, punitive damages and attorneys’ fees. In May 2010, the case was transferred to
the Southern District of Florida for coordinated pre-trial proceedings as part of a multi-district litigation (MDL)
involving numerous defendant banks, In re Checking Account Overdraft Litigation. In January 2011, plaintiffs
filed a second amended complaint against CONA in the MDL court. In February 2011, CONA filed a motion to
dismiss the second amended complaint. On March 21, 2011, the MDL court granted CONA’s motion to dismiss
claims of breach of the covenant of good faith and fair dealing under Texas law, but denied the motion to dismiss
in all other respects. The parties have been engaged in discovery since May, 2011. On June 21, 2012, the MDL
court granted plaintiff’s motion for class certification. The modified scheduling order entered by the MDL court
on November 29, 2012, contemplates the conclusion of discovery in the second quarter 2013 and remand to the
Eastern District of Louisiana thereafter.
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