On Monday, a lawsuit filed in Virginia that accused Capital One of imposing excessive charges on credit and debit card transactions in foreign currencies was dismissed by a federal judge. Judge Patricia Tolliver Giles, presiding in Alexandria, concluded that the cardholders who initiated the class action suit failed to pinpoint any explicit and straightforward terms within their card agreements regarding the rates and fees Capital One could apply.
Capital One Wins FX Charges Lawsuit Brought by Cardholders
The lawsuit, brought forward by four individuals, claimed that Capital One inflated its profits by applying “fictional” rates for converting transactions made in foreign currencies into U.S. dollars.
According to the plaintiffs, the bank, headquartered in McLean, Virginia, did not adhere to the guidelines established by card networks Visa and Mastercard, which require the use of wholesale market rates or government-mandated rates for such conversions.
Furthermore, the plaintiffs argued that this practice increased profits for Capital One and resulted in higher transaction fees for cardholders, who typically pay a fee of around 3% of the transaction value.
Judge Giles stated that the plaintiffs did not convincingly demonstrate that the card agreements included the card networks’ guidelines or set a clear expectation that the exchange rates would be similar to those used by Capital One or the card processors.
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“Plaintiffs have not successfully alleged enough facts to claim that the defendants broke a contractual obligation through their own actions or those of the processors,” Giles wrote in her decision.
In 2023, Capital One’s credit card segment generated $25.7 billion, making up 70% of the bank’s total net revenue. The plaintiffs’ legal team has also filed a comparable lawsuit against Bank of America in the federal court of Charlotte, North Carolina.
On December 6, a federal magistrate judge suggested that Bank of America’s request to dismiss the lawsuit should be denied. A district judge will make the decision on whether to follow this recommendation.
Capital One announced on February 19 its intention to acquire Discover Financial Services, a competitor of Visa and Mastercard’s card networks, in a deal valued at $35.3 billion in stock.
