A settlement was reached between the U.S. Trustee Program, an arm of the Justice Department that monitors bankruptcy courts, and Capital One Financial Corporation over allegations that the credit-card issuer filed over 5,000 claims on credit-card debts that it filed that the company was not entitled to and received $340,000 from debtors that it should not have.
Under the settlement, Capital One agreed to hire an independent auditor to examine 650,000 customer accounts, dating back to 2005, to ensure that the company did not improperly collect debts that had already been discharged in prior bankruptcy cases.
The settlement marks a victory for the U.S. Trustee Program that stepped up enforcement efforts in recent years after being criticized for not challenging creditor behavior. Consumer advocates, law professors and judges had complained that the agency was not adequately protecting debtors from overzealous creditors.
That has been a hot topic in recent months as more and more homeowners turn to bankruptcy in an effort to save their homes from foreclosure as the effects of the nationwide economic crisis hit home.
