WASHINGTON, April 24 Capital One Financial Corp
agreed to pay $3.5 million to resolve charges that it
understated losses from auto loans in the months leading up to
the financial crisis, the U.S. Securities and Exchange
Commission said on Wednesday.
The SEC said Capital One failed to properly account for
losses in the second and third quarters of 2007, even though the
bank's auto lending arm was facing much higher delinquencies
than it originally forecast.
In a statement, the bank said no consumers were affected by
the conduct and it will not be required to restate financial
results under the deal.
"The settlement will not affect any current or future
business activities by Capital One," the bank said.
Capital One's auto loan business relied on loans to subprime
borrowers, the SEC said. As credit markets began to deteriorate
in 2006 and 2007, the bank failed to incorporate assessments
into its disclosures that found that the decline had a
significant impact on its loan loss expense.
The bank understated its second-quarter loan loss expense by
18 percent and its third-quarter loan loss expense by 9 percent,
the SEC said.
The SEC settled related charges against the bank's former
chief risk officer, Peter Schnall, and former divisional credit
officer David Lagassa, who agreed to pay $85,000 and $50,000 in
Schnall and Lagassa remain with Capital One, a bank
spokeswoman said. Schnall is serving in a senior advisory role
until the end of the year, and Lagassa is a managing vice
president in financial services, the spokeswoman, Tatiana Stead,
The bank and its two executives neither admitted nor denied
the findings, the SEC said.
Lawyers for Schnall and Lagassa did not immediately respond
to a request for comment.