Capital One Sued by New York's Attorney General Over Unrecovered Customer Earnings
**Capital One Faces Lawsuit Over Alleged Hidden Savings Account Product**
Capital One is under scrutiny once again, this time for a lawsuit filed by the New York Attorney General Letitia James, accusing the bank of misleading customers about its 360 Savings account. The lawsuit, which picks up where a dismissed lawsuit brought by the Consumer Financial Protection Bureau (CFPB) left off, alleges that Capital One kept customers in the dark about the availability of a higher interest savings account, 360 Performance Savings.
The New York Attorney General's argument is that Capital One created a secret, two-tier system of savings accounts in which only new accounts received the high interest rates the bank advertised. While Capital One marketed its 360 Savings accounts as having "one of the nation's best savings rates," the lawsuit claims that the bank artificially kept the interest rates low while a newer product, the 360 Performance Savings account, offered significantly higher rates.
The disparity in returns between the two account products grew in 2022, when the Federal Reserve began to raise interest rates. While Capital One froze its 360 Savings rate at 0.3%, it increased its 360 Performance Savings rate to as high as 4.35%.
The lawsuit seeks restitution and damages for affected Capital One customers, as well as a penalty and disgorgement of profits from the bank. Capital One maintains that it strongly disagrees with these allegations and plans to vigorously defend itself in court.
This is not the first time Capital One's 360 Savings account has been at the center of a lawsuit. In January, the CFPB filed a lawsuit against Capital One, alleging the bank cheated millions of consumers out of more than $2 billion in interest. However, the CFPB dropped the lawsuit in February as part of a broader scaling back of enforcement efforts by the White House.
Capital One introduced the 360 Performance Savings in September 2019, and the product was marketed widely, including on national television. However, the bank allegedly failed to clearly inform customers about the launch of the newer account, leading many to remain in the older account without realizing they were missing out on higher returns. Additionally, Capital One was accused of removing references to the older account from its website and directing customers to the newer account page, further confusing customers.
A class action against Capital One regarding its 360 Savings accounts is set to go to trial on July 21 in the U.S. District Court for the Eastern District of Virginia. Capital One has reportedly agreed to settle a related class-action lawsuit for $425 million, which awaits final approval from a federal judge in Virginia.
Despite the settlement, the company still faces ongoing legal challenges, including the lawsuit filed by the New York Attorney General. The latest lawsuit against Capital One comes just weeks after the Fed and the Office of the Comptroller of the Currency approved Capital One's application to acquire Discover for $35.3 billion. Detractors such as Sen. Elizabeth Warren are continuing to press for a halt to the Capital One-Discover deal.
The lawsuits highlight concerns about transparency and fairness in banking practices, particularly regarding the marketing of savings products. Capital One's alleged deceptive practices in the 360 Savings and 360 Performance Savings accounts underscore the need for clear and honest communication with customers.
Capital One is being accused by the New York Attorney General of creating a secret two-tier system of savings accounts, using the 360 Savings and 360 Performance Savings products, which allegedly misled customers about the availability of higher interest rates in the business sector. This lawsuit involves a dispute over finance, as Capital One is alleged to have kept interest rates low on the 360 Savings account while offering significantly higher rates on the 360 Performance Savings account.
