Thursday, February 20, 2014

CapitalOne: Pressuring Customers (2012)

CapitalOne Company logo

CapitalOne is a banking company that focuses on giving credit cards, different types of loans, and several savings products. In July of 2012, CapitalOne was convicted of pressuring their customers into buying payment protection plans and other types of “free” services. However, none of these services were free. Capital One allegedly targeted people with poor credit because they have less cash and “are more likely to buy financial products in error because of misunderstandings” (Wagner). 
Apparently, when signing up for a credit card through CapitalOne, it generally only takes about two minutes without any ads for extra products or other interruptions. Conversely, customers who had low credit limits had to suffer through phone calls that could have lasted up to eight minutes, and had to listen to pitches given by the operators, who read from scripts, while waiting for their card to be approved and activated. The operators were supposedly selling payment protection plans, which would cancel some of the person’s credit card debt if that person unfortunately became sick or lost their job.
As a result, CapitalOne is being forced to pay a total $210 million in consumer refunds and fines. CapitalOne must pay $35 million to Civil Money Penalties to the Consumer Financial Protection Bureau (CFPB). The CFPB was set up in 2011 to protect consumers from excessive or hidden fees and other financial threats” (Wagner). In addition, Capital One must pay $35 million to the Office of Comptroller of the Currency, which is a detached governmental agency that supervises the procedures of the bank.

An example of a CaptialOne credit 

An economist, named Milton Friedman, believed in the theory of Individualism. Friedman’s individualistic theory states that “the only goal of business is to profit, so the only obligation that the business person has is to maximize profit for the owner or the stockholders” (Salazar). This means that businessmen and women should maximize profits within the constraints of the law. I think that Freidman would have half agreed, and half disagreed with Capital One’s decision. Friedman would have agreed with their decision because telling customers about these “payment plans” and “protections” did maximize CapitalOne’s profits for the time being, however, it was not legal, and therefore, Friedman would have disagreed with this part. The company should not have tricked their customers, and if Capital One was more honest with their customers, they still could have made a profit without tricking them.

Utilitarianism Another ethical point of view is Utilitarianism. Utilitarianism is a modern day approach to ethics. It states that people should “maximize happiness in yourself and others” (Salazar). The Utilitarianism theory thinks happiness is the only thing that’s valuable. Capital One did what was best for them, which clearly agrees with the thought of maximizing their own happiness, yet, the other part of the theory states to maximize happiness in others as well, which CapitalOne obviously did not fulfill. Tricking their customers was not a smart decision for CapitalOne. Once people heard about this scandal, it is no secret that customers felt betrayed and no longer trusted CapitalOne. As a result, in the long run, this will not benefit CapitalOne, because their reputation is hindered until they can redeem themselves to their shareholders and customers.

Richard Fairbank; CapitalOne CEO and founder

Kantianism, another ethical theory, revolves around duty. Every duty or action performed is out of good will. This means that “your motivation is from duty and is not simply self-seeking” (Salazar). If someone only does something because they know it is the right thing to do, Kantianism followers believe it is still wrong, because you are not doing the action for others, you are doing it for you. The formula of humanity says that a rational person should never be treated as a means, but as an end. Although most would agree that what Capital One did was wrong, they are trying to make it right with the fines and payments to the consumers and the other agencies involved.

Virtue Theory The four primary virtues of Virtue theory are courage, honesty, temperance, and justice. Courage is risk-taking, and the ability and readiness to take a stand for the right ideas and actions (Salazar). Some may disagree, but CapitalOne did show courage with their actions. Now, you may not agree that what they did was right, but they took a risk, and accepted the consequences for their actions, which at this point, is very courageous of them. Also, they took the risk of pressuring customers, not knowing what could happen to the workers and the company. It is clear there was no honesty in the actions of the company, but there was honesty in the outcome. The company never tried to appeal or deny the fact they pressured their customers, they accepted the consequences. As far as temperance goes, I would say they did not have “reasonable expectations and desires” with their decision (Salazar). It is very unrealistic to think the company would never got caught, and it is very unreasonable and selfish to target the poor end of the company’s customers. In order to have temperance, CapitalOne should have never made the decision they did, and hopefully will never do so again. CapitalOne does not have justice in the sense of “hard work, quality products, good ideas, or fair practices” because they tricked their customers (Salazar). However, Capital One did take responsibility for their actions, and are paying their customers, so in the end, the customers and shareholders of the company received justice.


Bowman, Bobbi . "CapitalOne to Pay $210 Million for Misleading Millions of Customers." McLean Patch. N.p., 20 July 2012. Web. 17 Feb. 2014. <>.

DesJardins, Joseph R.. An Introduction to Business Ethics. 5th ed. New York, NY: McGraw-Hill Higher Education, 2014. Print.

Salazar, Heather. Business Ethics Lectures. WNEU. Spring 2014.

Salazar, Heather. “Kantian Business Ethics,” in Business in Ethical Focus, ed. Fritz Allhoff and Anand J. Vaidya (Broadview Press, 2008).

Wagner, Daniel. "Capital One to pay $210M over marketing tactics." HuffingtonPost. N.p., 18 July 2012. Web. 15 Feb. 2014. <>.

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