About CapitalOne.com


Capital One Financial Corp. (CAPITALONE.COM) is a McLean, Virginia-based bank holding company specializing in credit cards, home loans, auto loans, banking, and savings products

Like most credit card companies that issue cards to people with poor or no credit (called "subprime"), CapitalOne.com offers multiple cards with low limits to some consumers, which can result in multiple over-limit and late payment fees and is considered by some consumer advocates to be predatory.


Defenders of the practice argue that credit issuers should not be held responsible for borrowers' decisions.


In May 2007, CapitalOne began an experiment that has come to be known as a Decoupled debit card.

This card is novel in that prior to this launch, a debit card was always tied to a traditional financial institution, such as a bank or credit union. CapitalOne's Mastercard-branded decoupled card did not require an account be opened with a "retail" financial institution, and was made in partnership with the Ukrops grocery chain, based in CapOne's hometown of Richmond, VA. The card was also tied to a reward program offered by Ukrops. That one year experiment ended in May of 2008, and has been followed up with a national rollout of its own version of a decoupled debit card tied to its own reward program.



Its practice of issuing multiple cards to some borrowers with low credit ratings doesn't appear well-known in the investment community. And just how much Cap One relies on fee income, vs. interest, is a mystery, since, like most lenders, it doesn't disclose that. All credit card companies have become more reliant on fee income in recent years, but in a report issued in 2002, William Ryan, an investment analyst at Portales Partners, warned that Cap One's earnings could be "devastated" if regulators cracked down on multiple cards or fees.


Cap One acknowledges that it offers multiple cards. "Our goal is to offer products that meet our customers' needs and appropriately reflect their ability to pay," it says. The company also stated: "Within our current U.S. portfolio, the vast majority of Capital One customers have only one CapitalOne creditcard with a very small percentage choosing to have three or more cards." Spokeswoman Tatiana Stead declined to offer precise numbers or to say whether households with three or more cards were concentrated among "subprime" borrowers, who have low credit ratings.


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