Consumer complaint received 2024-08-14
Product: Vehicle loan or lease — Loan
Issue: Repossession — Damage caused or loss of personal items in vehicle during the actual repossession
Company: CAPITAL ONE FINANCIAL CORPORATION (TX)

Dear Capital One Auto Finance, I am writing to formally address specific violations by Capital One Auto Finance regarding the interest rates and fees charged on my auto loan. Capital One Auto Finance, headquartered at XXXX XXXX XXXX, XXXX, Texas, is subject to Texas U.S. Treaty Law, which enforces a 10 % interest rate limit. My loan was originated in Minnesota, where state law imposes an interest rate limit of 8 %. The actions taken by Capital One Auto Finance violate these laws, as well as relevant federal regulations governing auto loans. 

Specific Legal Violations : Excessive Interest Rates : Texas Law : Texas U.S. Treaty Law limits the maximum allowable interest rate to 10 %. However, my loan has been charged at an annual percentage rate ( APR ) of 23.25 %, which clearly exceeds the legal limit under Texas law. 
Minnesota Law : According to Minnesota Statute 334.01, Subdivision 3 ( a ), the APR on loans ( excluding credit cards ) is limited to 21.75 %. The interest rate of 23.25 % charged on my loan exceeds this legal limit by 1.5 %, which constitutes a violation of Minnesotas statutory requirements.

Example Calculation : Loan Amount : {$18000.00} Interest Charged : At 23.25 % APR, the total interest over 72 months is approximately {$10000.00}.

Legal Limit in Minnesota ( 21.75 % ) : The interest should be approximately {$10000.00} over 72 months. 
Excess Interest Charged : {$10000.00} ( Charged ) - {$10000.00} ( Legal Limit ) = {$710.00} overcharged. 
Unlawful Fee Assessments : Late Fees : On XX/XX/XXXX, I was charged a late fee of {$770.00}. This fee is not reasonable and violates both Minnesota law and federal regulations, specifically the Truth in Lending Act ( TILA ) and the National Bank Act. 
Why the Late Fee is Unreasonable and Legally Noncompliant : Minnesota Law ( 334.171 ) on Reasonable Delinquency and Collection Charges : Minnesota Statute 334.171 requires that delinquency and collection charges be reasonable and must not exceed the limits set by applicable federal laws. The statute states : " If an open-end credit plan, agreement, or arrangement between the buyer and seller so provides, a seller or holder may collect a delinquency and collection charge on each installment in arrears for a period of not less than ten days in an amount not in excess of any such charge which may be imposed on residents of this state by any institution defined in subsection ( c ) ( 2 ) ( F ) of section 101 ( a ) of the Competitive Equality Amendments of XXXX and the Bank Holding Company Act of XXXX, United States Code , title 12, section 1841 ( c ) ( 2 ) ( F ), by any national banking association under section 85 of the National Bank Act of XXXX, United States Code , title 12, section 85, or by any state-chartered insured depository institution under section 521 of the Depository Institutions Deregulation and Monetary Control Act of XXXX, United States Code, title 12, section 1813d ( a ). '' This statute anticipates that delinquency fees should be nominal, typically around {$25.00} to {$50.00} per occurrence, aligning with industry standards for similar auto loans. 
Federal Guidelines on Reasonable Fees : The Truth in Lending Act ( TILA ), under 15 U.S.C. 1605, requires that fees imposed must be reasonable and related to the actual costs incurred by the lender. TILA, along with regulations under 12 C.F.R. 1026.4, specifies that any finance charges, including late fees, must be disclosed and justified by the lender 's actual costs. 
The National Bank Act, under 12 U.S.C. 85, similarly restricts the imposition of fees to those that are reasonable and necessary to cover the lenders actual expenses.

Disproportionate Fee Relative to the Loan Amount : The late fee of {$770.00} represents a significant percentage of the monthly payment on my loan, which is {$470.00}. A late fee that exceeds the monthly payment amount is inherently unreasonable, as it does not correspond to the administrative burden or potential losses incurred by the lender due to the late payment. 
For comparison, a fee of {$770.00} on a monthly payment of {$470.00} equates to a penalty of approximately 162.4 % of the payment due. This is grossly disproportionate and can not be justified under any reasonable interpretation of " delinquency and collection charges '' under Minnesota law or federal regulations. 
Legal Limits on Late Fees : Both state and federal laws emphasize that fees must be " reasonable '' and " customary. '' Industry standards for similar loans typically cap late fees at around {$25.00} to {$50.00}. The approximate {$770.00} fee charged by Capital One far exceeds these norms, making it legally excessive. 
Example Calculation of Reasonable Late Fee : Industry Standard : {$25.00} to {$50.00} per late payment.

approximately Charged : {$770.00}. 
Overcharged Amount : {$770.00} ( Actual Charged ) - {$50.00} ( Maximum Reasonable Fee ) = {$720.00} overcharged. 
Improper Refund Handling on Prepayments : Minnesota Statute 334.01, Subdivision 3 ( e ) requires that if a finance charge is calculated or collected in advance and the borrower prepays the loan, the borrower must be credited with a refund to ensure the APR does not exceed the maximum allowed. I have made prepayments on this loan, yet no refund has been issued to account for the excess interest charges.

Summary of Violations : Violation of Texas Interest Rate Limits : Charging an interest rate of 23.25 % exceeds Texass 10 % cap.

Violation of Minnesota Interest Rate Limits : The rate of 23.25 % surpasses Minnesotas maximum allowable rate of 21.75 %, resulting in an overcharge of approximately {$710.00}.

Excessive and Unreasonable Fees : Late fees have been overcharged by approximately {$720.00}, which is unreasonable and noncompliant with Minnesota and federal laws.

Failure to Issue Prepayment Refunds : No refund has been provided for prepayments, as required under Minnesota law.