WASHINGTON (AP) — Capital One Financial Corp. is paying $3.5 million to settle federal civil charges of underreporting as much as $123 million in losses on auto loans in the months preceding the financial crisis.

The Securities and Exchange Commission said Wednesday that Capital One understated its auto loan losses in financial reports for the second and third quarters of 2007 when they came in higher than the bank expected.

Capital One, based in McLean, Va., is the sixth-largest U.S. bank based on deposits. Most of the profits in its auto finance business came from loans to consumers with weak credit histories, the SEC said.

Two former Capital One executives agreed to pay a total $135,000 in fines to settle the SEC charges. The bank and the executives neither admitted nor denied wrongdoing.