Capital One 2014 Annual Report Download - page 279

member banks, including Capital One (collectively “the Opt-Out Plaintiffs”). Relatedly, in December 2013,
individual consumer plaintiffs also filed a proposed national class action against a number of banks, including
Capital One, alleging that because the banks conspired to fix interchange fees, consumers were forced to pay
more for the fees than appropriate. The consumer case and virtually all of the opt-out cases were consolidated
before the U.S. District Court for the Eastern District of New York for certain purposes, including discovery. In
November 2014, the court dismissed the proposed consumer class action. The remaining consolidated cases are
in their preliminary stages, and Visa and MasterCard have settled a number of individual opt-out cases, requiring
non-material payments from all banks, including Capital One.
As members of Visa, our subsidiary banks have indemnification obligations to Visa with respect to final judgments
and settlements, including the Interchange Lawsuits. In the first quarter of 2008, Visa completed an IPO of its
stock. With IPO proceeds, Visa established an escrow account for the benefit of member banks to fund certain
litigation settlements and claims, including the Interchange Lawsuits. As a result, in the first quarter of 2008, we
reduced our Visa-related indemnification liabilities of $91 million recorded in other liabilities with a corresponding
reduction of other non-interest expense. We made an election in accordance with the accounting guidance for
fair value option for financial assets and liabilities on the indemnification guarantee to Visa, and the fair value of
the guarantee as of December 31, 2014 was zero. Separately, in January 2011, we entered into a MasterCard
Settlement and Judgment Sharing Agreement, along with other defendant banks, which apportions between
MasterCard and its member banks the costs and liabilities of any judgment or settlement arising from the
Interchange Lawsuits.
In March 2011, a furniture store owner named Mary Watson filed a proposed class action in the Supreme Court of
British Columbia against Visa, MasterCard, and several banks, including Capital One (the “Watson Litigation”).
The lawsuit asserts, among other things, that the defendants conspired to fix the merchant discount fees that
merchants pay on credit card transactions in violation of Section 45 of the Competition Act and seeks unspecified
damages and injunctive relief. In addition, Capital One has been named as a defendant in similar proposed class
action claims filed in other jurisdictions in Canada. In March 2014, the court granted a partial motion for class
certification. Both parties appealed the decision to the Court of Appeal for British Columbia, which heard oral
argument in December 2014.
Credit Card Interest Rate Litigation
The Capital One Bank Credit Card Interest Rate Multi-district Litigation matter was created as a result of a
June 2010 transfer order issued by the United States Judicial Panel on Multi-district Litigation (“MDL”), which
consolidated for pretrial proceedings in the U.S. District Court for the Northern District of Georgia two pending
putative class actions against COBNA-Nancy Mancuso, et al. v. Capital One Bank (USA), N.A., et al., (E.D.
Virginia); and Kevin S. Barker, et al. v. Capital One Bank (USA), N.A., (N.D. Georgia). A third action, Jennifer
L. Kolkowski v. Capital One Bank (USA), N.A., (C.D. California) was subsequently transferred into the MDL.
In August 2010, the plaintiffs in the MDL filed a Consolidated Amended Complaint alleging that COBNA
breached its contractual obligations, and violated the Truth in Lending Act (“TILA”), the California Consumers
Legal Remedies Act, the UCL, the California False Advertising Act, the New Jersey Consumer Fraud Act, and
the Kansas Consumer Protection Act when it raised interest rates on certain credit card accounts. As a result of a
settlement in another matter, the California-based UCL and TILA claims in the MDL are extinguished. The MDL
plaintiffs seek statutory damages, restitution, attorney’s fees and an injunction against future rate increases. In
August 2011, after the completion of fact discovery, Capital One filed a motion for summary judgment, which
was granted in September 2014. Plaintiffs filed a Notice of Appeal to the Eleventh Circuit Court of Appeals in
October 2014.
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CAPITAL ONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Capital One Financial Corporation (COF)