Capital One slammed over credit card chequesIt broke rules banning unsolicited written cheques

08 November 2006

Capital One has been reprimanded for sending customers more than a million pre-written credit card cheques last year.

The bank’s actions breached rules which prohibit banks and credit card companies from sending out unsolicited credit card cheques with a pre-completed amount. Credit card cheques have also been blamed for contributing to fraud as they aren't as secure as a card.

Each Capital One cheque showed the customer's name and a pre-completed loan amount. All the customer had to do to get the loan was pay the cheque into a bank account.

More than 800,000 Capital One customers received the cheques and 20,000 were used. The bank has since written to all the affected customers.

Serious breach

Capital One admitted that it had breached the Banking Code rules and said it had reported the matter promptly to the Banking Code Standards Board (BCSB).

The BCSB said the breach was regarded as ‘most serious and potentially damaging to consumer confidence in the code’.

Robert Skinner, Chief Executive of the BCSB, said: ‘We are disappointed at this serious failure of compliance management. However Capital One, having identified the breach, co-operated fully with us in our investigation.'

Capital One has said it has taken steps to make sure the breach is not repeated.

Cheques cost more

Mike Naylor, Which? money expert, said: 'It's very disappointing that one of the biggest credit card companies didn't comply with the Banking Code. Credit card cheques are never a good idea as they cost more than using your credit card and importantly don't give the same protection as paying by card.'

Under Section 75 of the Consumer Credit Act, when you pay for goods or services with a credit card that cost more than £100 and less than £30,000 you can claim your money back from the card company rather than the retailer for breach of contract or misrepresentation - for example, if the shop goes bust or goods are faulty.

Which? wants credit card cheques to be sent out only if a cardholder has requested them.