Welcome

On October 2, 2008, the United States Trustee for Region 1 (the “UST”) filed a Complaint (the “Complaint”) against Capital One Bank (USA), N.A. (“Capital One”) in the United States Bankruptcy Court for the Eastern District of Massachusetts (the “Court”).  The Complaint commenced an adversary proceeding relating to the Chapter 13 bankruptcy case of In re William L. Galley and Laurie A. Galley, 06-12132-JNF.  The Complaint alleged, among other things, that Capital One had filed more than one hundred thousand proofs of claim per month on average, seeking payment as an unsecured creditor from the bankruptcy estates of its credit card account customers.  The Complaint further alleged that in 2005, Capital One’s procedures for identifying customers who had previously filed for bankruptcy failed and that Capital One improperly filed approximately 5,600 proofs of claim in bankruptcy cases of debtor-customers whose debt previously had been discharged, resulting in the alleged improper collection by Capital One of approximately $340,000.00.

Capital One and the United States Trustee entered into negotiations and ultimately entered into that certain Stipulated Final Judgment & Order, approved by the Court on November 20, 2008 (as amended, the “Stipulated Judgment”).  Among other things, the Stipulated Judgment sets forth a process by which the Auditor, with the cooperation of Capital One, reviews and audits the process by which Capital One filed proofs of claim during the several periods at issue, and the remediation process going forward.  In the Stipulated Judgment, Capital One denies any wrong-doing or improper actions and notes its voluntary decision to take action to review and remediate its processing of proofs of claim in consumer bankruptcy cases.  Copies of the Stipulated Judgment and all amendments are available for review on this website.

Pursuant to Section II of the Stipulated Judgment, Capital One retained Melanie Cyganowski (the “Auditor”), former Chief Bankruptcy Judge for the Eastern District of New York and current partner in the law firm Otterbourg, Steindler, Houston & Rosen, P.C. (“Otterbourg”), to oversee the implementation of the procedures set forth in the Stipulated Judgment.  The Auditor subsequently retained Otterbourg as her legal counsel in connection with the duties required under the Stipulated Judgment. 

In accordance with Section II.I. of the Stipulated Judgment, the Auditor is required to direct and supervise Capital One’s Corporate Audit Services team (“CAS”) in CAS’s review of Capital One’s business records to determine those Capital One account holders that filed a bankruptcy case in which Capital One filed a proof of claim on debt that was discharged in a prior bankruptcy case. Pursuant to Section III of the Stipulated Judgment, CAS is required to prepare, and the Auditor is then required to certify the accuracy of four separate reports:  (1) the Master Claims Report; (2) the Prior Case Report; (3) the Erroneous Claims Report; and (4) the Distributions and Refund Report (collectively, the “Reports”). 

Pursuant to the Stipulated Judgment, the audit was divided into three audit periods.  The first audit period covers proofs of claim filed during the period from January 1, 2005 through the date upon which the Stipulated Judgment was entered, November 20, 2008 (the “First Audit Period”).  The second audit period covers proofs of claim filed during the period from November 21, 2008 through and including November 20, 2009 (the “Second Audit Period”).  The third audit period covers proofs of claim filed during the period from November 21, 2009 through and including November 20, 2010 (the “Third Audit Period”).    

In an effort to streamline the audit for the Second Audit Period and the Third Audit Period, the Auditor, Capital One and the United States Trustee agreed that the Auditor would conduct her audit of the Second Audit Period and the Third Audit Period concurrently.  The Auditor has substantially completely the audit of the Reports issued by Capital One with respect to the proofs of claim filed during the First Audit Period and is in the process of certifying the Reports issued by Capital One with respect to proofs of claim filed during the Second Audit Period and the Third Audit Period.  The Reports, the Auditor’s certifications of the Reports, and various related documents are available on this website.

Capital One has withdrawn the claims identified in the Erroneous Claims Report for the First Audit Period.  On January 4, 2011, the Court entered an order requiring Capital One to file “Motions to Reopen” in cases in which it had received distributions equal to $2,000 or more on account of the filing of an Erroneous Claim.  There were approximately 145 Erroneous Claims that fell into this category.  The Auditor has been advised that (i) Capital One completed the filing of such Motions; (ii) Capital One issued refunds with respect to all Erroneous Claims filed in cases that were reopened and withdrew such claims; and (iii) Capital One also completed the refund of distributions received on account of Erroneous Claims that were filed in open cases and closed cases that were not required to be reopened because the aggregate distributions were less than $2,000.00.

The Consent Order also directed the Auditor and her professionals to determine the amount of reasonable fees and expenses to be reimbursed to debtors, counsel and/or trustees who incurred these costs when objecting or filing adversary proceedings with respect to Erroneous Claims.  As part of this process, the Auditor solicited information from these parties, received responses from a number of the people solicited, reviewed such responses, and provided Capital One with her recommendation as to the amount of reasonable fees and expenses that should be reimbursed by Capital One.  The Auditor advised Capital One and each person requesting a refund of her recommendation and, the Auditor understands that Capital One has refunded such reasonable fees and expenses in accordance with the Auditor’s recommendation.

Telephone inquiries can be made at (800) 873-4813

Email inquiries can be sent to CapOneAudit@oshr.com