Capital One, the sixth-largest bank in the US, has reached a $3.5m (£2.27m) settlement over the underreporting of $123m in losses on car finance before the credit crisis.
The Securities and Exchange Commission (SEC) – the US federal agency which oversees the US stock exchange and the brokers, dealers and companies who trade and are traded on it – had charged Capital One with not making fully clear the size of losses recorded against its car loans in the second and third quarter of 2007.
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In a statement, the SEC said: "As credit markets began to deteriorate, Capital One’s internal loss forecasting tool found that the declining credit environment had a significant impact on its loan loss expense. However, Capital One failed to properly incorporate these internal assessments into its financial reporting, and thus understated its loan loss expense by approximately 18% in the second quarter and 9% in the third quarter."
Also in a statement, Capital One said: "No consumers were affected, the SEC does not criticize the company’s or the auto finance unit’s reserves as of 2007 year-end, and the settlement does not require a restatement of Capital One’s financial results. The settlement will not affect any current or future business activities by Capital One."
In meeting the settlement, a former chief risk officer and former divisional credit officer of Capital One were fined $135,000 between them.
richard.brown@timetric.com
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