“Accurate financial reporting is a fundamental obligation for any public company,” wrote George Canellos, the co-director of the SEC’s division of enforcement, in a statement. “Capital One failed in this responsibility by underreporting expenses relating to its loan losses even as its own internal forecasting tool had signaled an increase in incurred losses due to the impending financial crisis.”
The SEC’s complaint against the individuals cited emails between the departments and other senior executives that discussed hiding the losses by manipulating the figures they would include in financial reports.
Both the company and the two executives “neither admitted nor denied” the investigation’s findings, but agreed to sign a consent order barring them committing or causing any violations of these federal securities laws in the future.
In a statement to The Hill following the settlement, Capital One said the reporting of reserves in its auto finance department did not affect consumers and the regulator only cites issues in the second and third quarters of 2007.
"The SEC does not criticize the company’s or the auto finance unit’s reserves as of 2007 year end and ... the settlement will not affect any current or future business activities by Capital One," wrote a spokeswoman.
This isn’t the first time the bank has been in trouble with financial regulators.
Last July, the Consumer Financial Protection Bureau forced Capital One to pay back $140 million to two million people for deceptive credit card marketing practices and pressuring consumers to buy unnecessary add-on products. The CFPB also tacked on a $25 million penalty.
The federal consumer watchdog said that Capital One targeted individuals with low credit scores or low credit limits.
CFPB Director Richard Cordray said at the time he wanted the action to “put companies on notice that these deceptive practices are against the law and will not be tolerated.”
-- This post was updated at 5:18 p.m.