Usury
Strange v. Capital One
Date: July 20, 2026
Issue: Whether Capital One (Cap One) violated the National Bank Act (NBA) by unlawfully charging credit card account holders excessive interest.
Case Summary: A Maryland federal court dismissed a lawsuit alleging that Cap One charged credit card account holders excessive interest.
In August 2025, Lynn Strange sued Cap One in a class action alleging it violated the NBA by unlawfully charging credit card interest rates of about 30% without a valid agreement. Strange claimed that Cap One’s standard credit card agreement was unenforceable because it allowed the bank to unilaterally change any term of the contract, leaving the agreement unsupported by consideration.
The NBA allows national banks to charge the interest rate permitted by the law of the state where the bank is located. Because Cap One is headquartered in Virginia, it may rely on Virginia law, which generally caps contractual interest at 12 percent, but allows banks issuing credit cards to charge any interest rate agreed to by the cardholder. If no valid agreement exists, however, Virginia’s default legal interest rate is six percent, and the NBA allows borrowers to recover twice the amount of interest charged above the lawful rate.
Strange alleged Cap One knowingly violated the NBA by charging interest above the six percent default rate without a valid agreement authorizing those charges. She sought to represent a class of Maryland consumers who accepted and first used Cap One credit cards in Maryland under the same Credit Card Agreement. Strange asserted claims for usury under the NBA and sought declaratory relief. Cap One moved to dismiss, arguing that Strange failed to state a plausible claim for relief under the NBA and federal law preempts her claims.
Judge Theodore Chuang of the U.S. District Court for the District of Maryland dismissed Strange’s lawsuit for failure to state a claim. To establish a usury claim under the NBA, a plaintiff must show that a bank knowingly charged or collected interest above the maximum rate allowed by applicable state law, which in this case was Virginia law. The court concluded Virginia Code § 6.2-301 does not cap credit card interest rates but provides a default six-percent rate when an agreement does not specify an interest rate. In addition, the court concluded Virginia Code § 6.2-313 governs Cap One’s credit card account and permits banks to charge interest, finance charges, and fees at rates agreed to under an open-end credit plan. Because § 6.2-313 supersedes conflicting statutes, the court concluded that § 6.2-301’s requirement for an express agreement stating a specific interest rate did not apply to Cap One’s Credit Card Agreement.
The court then considered whether Cap One and Strange had formed a valid contract. Although the agreement stated that Virginia law governed its terms, the court declined to enforce the choice-of-law provision until it first determined that the parties had formed a valid contract. Applying Maryland’s choice-of-law rules, the court found that the parties formed the contract in Maryland because Strange accepted and first used the credit card there. As a result, the court applied Maryland law to determine whether Cap One and Strange entered into a valid contract.
Next, the court considered whether Cap One’s unilateral change-in-terms clause made the Credit Card Agreement unenforceable for lack of consideration. Strange argued that the clause rendered Cap One’s promises illusory under the Fourth Circuit’s decision in Johnson v. Continental Finance Co., which invalidated an arbitration agreement containing a similar provision. The court rejected that argument and held that Johnson applied only to arbitration agreements, not to an entire credit card agreement supported by independent consideration. Because Cap One extended credit, Strange used the account, and both parties performed under the agreement, the court held that the Credit Card Agreement was supported by valid consideration and was therefore enforceable.
The court also rejected Strange’s alternative arguments that the Credit Card Agreement lacked consideration because Cap One could close her account or decline transactions. The court found that Strange had not properly pleaded those claims and, in any event, they failed on the merits, as these provisions did not relieve Cap One of its obligations for approved transactions. Once Strange used the credit card, the parties formed a binding contract, and Cap One repeatedly performed by extending credit and financing her purchases. For these reasons, the court concluded the Credit Card Agreement was supported by valid consideration and rejected Strange’s NBA claim.
Finally, the court rejected Strange’s argument that, even if the Credit Card Agreement was enforceable, its variable interest rate provision was too indefinite to create a binding contractual obligation. The court held that the agreement’s variable interest rate remained enforceable because the parties had formed a valid contract. The court also found that Virginia law expressly permits variable interest rates and that Virginia Code § 6.2-301 does not restrict their use in credit card agreements. Because the parties agreed to the interest rate terms and Virginia law authorized those terms, the court concluded Cap One did not charge interest above the rate permitted by Virginia law.
Bottom Line: The court held that Cap One’s Credit Card Agreement was not illusory and enforceable under Virginia law, defeating Strange’s claim that the bank unlawfully charged excessive interest under the NBA.
Document: Opinion
