A Vancouver lawyer representing a mentally ill woman saddled with credit card debt is taking a stand against Capital One — saying it may not have been legal for the company to issue her a card in the first place.
"The [B.C.] legislation says it's an ‘unconscionable’ practice to give someone a credit card if you know there is no prospect of her repaying it," said George Gregory, pro bono lawyer for 62-year-old Nancy Chamberlain.
"They knew her income. They heard what she is like on the phone. There is no way that they could reasonably have thought that she is going to be able to repay this money."
Chamberlain, who has several mental disorders and is also a cancer survivor, said she’s been living on a government disability pension of less than $1,000 per month since 1992. She signed up for a card in 2006 after U.S.-based Capital One mailed her a flyer saying she was pre-approved.
Refused credit elsewhere
"To be honest, I was quite touched that they had faith in me," said Chamberlain. "I tried to get a credit card through my bank, the Royal Bank, and they said that I couldn’t."
After she answered basic questions through an automated phone system, Chamberlain said Capital One sent her a nine per cent interest rate card with a $1,000 limit.
"I don’t remember a great deal about it," said Chamberlain, whose memory is affected by mental illness. "I just remember all the prompts I had to do to get the card."
Chamberlain used up her available credit and made some initial payments. However, she said, when the interest rate then doubled — to 19.8 per cent — she had trouble keeping up. In 2007, she said her social worker told her not to pay anymore because the charges were unfair.
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Records show that the social worker wrote to Capital One to tell the company Chamberlain is on a disability pension and couldn't pay her debt.
She was then referred to George Gregory, a lawyer with a B.C. group called Access Pro Bono, which gives free legal assistance to people facing hardship. By that time, Chamberlain was getting calls and letters from collection agents.
"She would get these [letters] and she would call me and she was ... it was like there were terrorists at the door. She was just terrified," said George.
"I was scared. How I was going to try to make ends meet and live at the same time?" said Chamberlain.
'Sucking poor people'
"This is wretched," Gregory added. "There is no societal benefit to sucking poor people in to debts they cannot afford."
He began a drawn-out battle with Capital One, disputing the debt because he believes the company should not have issued the card in the first place.
Gregory points to a section of the B.C. Business Practices and Consumer Protection Act, which reads: "An unconscionable act or practice by a supplier may occur before, during or after the consumer transaction.… The circumstances that the court must consider include …that, at the time the consumer transaction was entered into, there was no reasonable probability of full payment of the total price by the consumer."
"This legislation is about the most powerful piece of legislation in the province and no one uses it," Gregory said.
He admitted he has not found similar case law to support his legal argument in this case. However, he believes he could win on Chamberlain’s behalf in court — and set a precedent — if given the opportunity.
Capital One’s spokesperson in Canada, Laurel Ostfield, told CBC News that the company specializes in offering credit cards to people who can’t get credit elsewhere.
Firm 'would not discriminate'
The company declined to be interviewed further but sent a statement that reads, in part: "Our credit decisions are based on a number of factors but we would not discriminate against anyone because their income comes from sources such as disability insurance or a pension plan."
Capital One also stressed it believes it has complied with all applicable laws.
Because of compound interest, Chamberlain’s debt has skyrocketed to $2,575.17. As a result of CBC News inquiries, however, Gregory said Capital One offered to wipe out Chamberlain’s debt if she can come up with a lump-sum payment of $540.
Yet she still receives flyers from Capital One every month, offering her more credit.
"Dear Nancy Chamberlain," the flyers read. "We’re delighted to let you know we have guaranteed your approval for a Capital One MasterCard. Now, all you have to do to accept is say, "yes!" It’s yours, guaranteed."
Gregory said the company has also broken rules by continuing to hound Chamberlain about her growing debt, through collection agents.
"She would phone up, distraught," said Gregory. "It was just tearing her apart. It was just so cruel and thoughtless."
He had instructed Capital One to stop the calls. Under provincial laws, a creditor is not to call a debtor once it has been told to contact them or their lawyer, by letter only.
"It’s like Whac-A-Mole — you hit it once and it pops up somewhere else," said Gregory. "I want it to stop."
Apology for calling
Capital One said collection agents did call Chamberlain once when they were not supposed to, and it is apologizing to her for that. More recently, it said Chamberlain initiated the contact by calling to ask about her credit report.
"By contacting Capital One [earlier this year], Ms. Chamberlain waived the cease-and-desist request her lawyer submitted," the company statement said.
However, it also said it has been unable to offer her any debt relief in the last three years, because of that same "no calls" order.
"By reaching out to us first, we would have been able to work with Ms. Chamberlain to find a payment plan that better fit her financial situation," the company said. "For example, she might have qualified for our hardship program, which could have lowered her interest rate to zero and given her more time to pay off her balance.
"We were unable to contact Ms. Chamberlain to make this offer, due to her request that we not call her."
Capital One said it has helped "thousands" of customers by lowering their interest rates when they got into trouble.
"We have been offering hardship programs to our customers in collections since 2001, and in the wake of a difficult economy, in August 2009 we introduced a new letter campaign to increase the number of customers who might benefit from one of these programs," the company said.
Lower balance offered
After CBC News got involved, Capital One offered to erase Chamberlain’s debt if she paid $540. She could also choose to pay $44 per month for five years, Gregory said, and the company would cancel all future interest.
But he has advised his client to reject the offer.
He expects Capital One will eventually write off the debt instead of taking her to court. However, he said he would welcome the opportunity to argue before a judge.
"I’d love to run this in court," Gregory said. "I’m just a law-and-order guy and they shouldn’t be doing this."
"I think all they care about is getting the almighty dollar and they don’t care how they go about it or anything," said Chamberlain.