Capital One is facing a lawsuit from the U.S. government’s Consumer Financial Protection Bureau (CFPB) for allegedly “cheating millions of consumers” by not paying more than $2 billion in interest to holders of its high-interest savings accounts. The case centers around the bank’s management of its “360 Savings” accounts, which the CFPB claims were unfairly frozen at low interest rates, despite rising national interest rates. Additionally, Capital One allegedly failed to inform these customers about a new account offering better rates.
The CFPB’s lawsuit accuses Capital One of freezing interest rates on its “360 Savings” accounts at a low 0.30% from 2019 to mid-2024, even as rates increased across the country. This move allegedly led to customers losing out on significant interest payments. The CFPB points out that during this period, the bank launched a new account called the “360 Performance Savings” account. This new account offered significantly higher interest rates, starting at 0.40% in 2022 and reaching 4.35% by January 2024.
In its legal filing, the CFPB claims that Capital One engaged in a deceptive strategy to keep customers enrolled in the lower-yielding “360 Savings” accounts, while the higher-yielding “360 Performance Savings” account was made difficult to find or distinguish. According to the agency, the bank failed to adequately disclose this new product to “360 Savings” customers, thereby preventing them from transferring to the higher-interest account.
CFPB Director Rohit Chopra condemned the bank’s actions, stating, “The CFPB is suing Capital One for cheating families out of billions of dollars on their savings accounts. Banks should not be baiting people with promises they can’t live up to.” He emphasized that consumers were harmed by Capital One’s strategy of obscuring the availability of better interest rates and that the lawsuit seeks to stop this “unlawful conduct,” provide restitution for affected consumers, and potentially impose civil penalties on the bank.
In response to the allegations, Capital One issued a statement expressing its disappointment with the CFPB’s lawsuit. The bank stated that it “strongly disagrees with their claims” and would “vigorously defend” itself in court. Capital One further defended its actions, stating that the launch of the new “360 Performance Savings” account was well-publicized, including national television advertisements. The bank also argued that the terms of the new account were “the simplest and most transparent” in the industry.
The controversy stems from the marketing of Capital One’s “360 Savings” account, which was frequently described as offering “one of the nation’s top,” “best,” and “highest” interest rates in the industry. However, the CFPB contends that despite these claims, Capital One failed to raise the interest rate on the account in line with broader market trends. Instead, the bank allegedly allowed the rate to remain frozen at a very low level, which was detrimental to consumers who trusted the bank’s advertised promises.
The legal battle between Capital One and the CFPB could have significant implications for the banking industry, particularly in terms of how financial institutions advertise and manage savings accounts. If the court sides with the CFPB, it could set a precedent that banks must be more transparent about changes in account terms and interest rates, as well as how they market new products to customers.
In addition to halting the alleged unlawful practices, the CFPB’s lawsuit seeks redress for affected consumers, potentially reimbursing them for the lost interest payments, and imposing civil money penalties on Capital One. The agency has stressed the importance of holding financial institutions accountable for practices that undermine consumer trust and financial well-being.
As the case progresses, it will likely draw attention to broader concerns over banking transparency and the ethical responsibilities of financial institutions in managing consumer accounts. For now, the outcome of the lawsuit will depend on whether the court finds that Capital One’s actions violated consumer protection laws.
