Capital One Sued for Allegedly Cheating Customers Out of $2 Billion in Interest
The Consumer Financial Protection Bureau (CFPB) has filed a lawsuit against Capital One, accusing the banking giant of misleading customers about high-interest savings accounts and depriving them of over $2 billion in potential interest payments.
Key Allegations
The CFPB’s complaint, filed on Tuesday, targets Capital One’s handling of its “360 Savings” accounts. The watchdog alleges that Capital One:
- Promised High Returns: Marketed the 360 Savings account as offering one of the nation’s highest interest rates.
- Failed to Adjust Rates: Kept interest rates for 360 Savings accounts low for several years, despite a national rise in rates.
- Introduced a Superior Account Without Transparency: Launched the “360 Performance Savings” account with significantly higher interest rates but failed to inform 360 Savings accountholders of the new product.
The CFPB claims Capital One deliberately obscured the distinction between the two accounts, even forbidding employees from proactively informing customers about the higher-yield 360 Performance Savings account.
Impact on Consumers
The CFPB asserts that these actions allowed Capital One to avoid paying billions in interest to millions of consumers. The agency seeks to impose civil penalties on the bank and provide financial relief to those impacted.
“Banks should not be baiting people with promises they can’t live up to,” said CFPB Director Rohit Chopra in a prepared statement.
Capital One Responds
Capital One has denied the allegations, stating it strongly disagrees with the CFPB’s claims and intends to “vigorously defend” itself in court. The bank expressed disappointment with the timing of the lawsuit, describing it as part of a “recent pattern of filing eleventh-hour lawsuits ahead of a change in administration.”
The company maintains that all its 360 banking products “offer great rates” and are readily available to new and existing customers without typical industry restrictions.
The Disparity in Interest Rates
According to disclosures on Capital One’s website:
- 360 Savings accounts: Currently offer an interest rate just under 0.50%.
- 360 Performance Savings accounts: Currently offer a rate of about 3.74%, nearly 7.5 times higher.
The gap has been wider in the past. In July 2024, the 360 Performance Savings rate was over 14 times higher than the 360 Savings rate. The CFPB highlighted that:
- The 360 Savings rate remained at 0.30% from December 2020 to at least August 2024.
- The 360 Performance Savings rate rose from 0.40% in April 2022 to a peak of 4.35% in early 2024 before slightly declining to 4.25% by August 2024.
Litigation Timing
The lawsuit was filed less than a week before the Jan. 20 inauguration of President-elect Donald Trump. Analysts at TD Cowen have noted that while litigation under the Trump administration may be easier to settle, the CFPB continued to pursue enforcement actions during his first term.
What’s Next?
The outcome of this lawsuit could have significant implications for both Capital One and broader banking industry practices. As the case unfolds, it will spotlight consumer rights in financial services and the responsibility of banks to ensure transparency and fairness in their offerings.
