by Joseph Kenny | 02/15/10

Capital One is a major credit card provider and the company has been accused in a class action lawsuit of practicing unfair marketing targeting consumers. At issue is the Capital One payment protection plan.

The purpose of the payment protection plan, according to Capital One marketing material, is to protect credit ratings in the event a consumer is unable to make credit card payments. The plan says it will automatically make minimum payments on cards covered by the plan. It is like an insurance policy that kicks in when certain circumstances prevent consumers from being able to make payments per the terms of the credit card.

What the lawsuit claims is that the requirements and restrictions are so burdensome and extensive that they make the protection plan worthless. In the view of the people filing the class action suit, the protection plan is just another credit card company ploy to bilk consumers out of millions of dollars in fees while providing little or no service in return.

The suit says claims that Capital One is targeting consumers with a “subprime credit card marketing” program. The suit contends that the practices being employed by Capital One are deceptive. Capital One is also accused of automatically enrolling consumers in the plan without their explicit approval or approval is so convoluted the consumers do not even know approval is being given.

Once again it appears that people who can least afford these types of fees are the ones being targeted in the marketing programs. The people filing the lawsuit believe that consumers with low credit limits are targeted because they are the people most likely to fall behind on their payments.

Additional claims are made that say Capital One is enrolling people without first verifying they even meet the terms of the payment protection plan. For example, the credit card holder is supposed to be employed to qualify for the plan. Instead there are thousands of unemployed who have been enrolled.

Also targeted by Capital One’s marketing program are senior citizens, self-employed, retired, part-time works, and seasonal workers. But Capital One has not been verifying income eligibility and instead has enrolled consumers anyway.

When consumers are enrolled automatically they must affirmatively cancel the enrollment to end it. Unfortunately many people are confused by the credit card fees that appear on their statements and don’t understand how to handle unexplained charges.

The lawsuit’s lead plaintiff is Linda McCoy. She signed up for the Capital One payment protection plan, became disabled, and tried to use the plan. She was denied despite having made payments for over a year and half. The lawsuit is filed on behalf of all California residents who have been targets of the program’s marketing or who have paid fees towards program enrollment.

The Capital One payment protection plan is just one example of many credit card automatic enrollment programs under scrutiny by consumers, attorney generals, and consumer advocates. The outcome of this suit could have far reaching implication for the credit card industry.