Capital One was sued by the Consumer Financial Protection Bureau for allegedly misleading consumers about high-interest savings account products. The lawsuit alleges that customers lost more than $2 billion in potential interest payments.
In a complaint filed Tuesday, the Consumer Financial Protection Bureau took aim at Capital One's promises and handling of its "360 Savings" account, which was promoted as offering one of the highest interest rates in the country. But the CFPB claims that Capital One has frozen its rates at low levels for at least a few years despite rising rates nationwide.
At the same time, the bank created "360 Performance Savings" accounts with much higher interest rates, at one point more than 14 times higher than the original "360 Savings" account, the CFPB added. The lawsuit comes as savers benefit from the Federal Reserve's decision to raise interest rates as part of its efforts to combat soaring inflation. As a result, some banks have launched high-interest savings accounts to attract savers.
But at the same time, some banks have not raised interest rates on their savings accounts, creating a gap between low- and high-income accounts, similar to two Capital One products. The CFPB said Capital One also marketed the products to conceal their differences and prohibited employees from "proactively telling" employees with 360 Savings accounts about the high-paying 360 Performance Savings.
"Capital One did not specifically notify 360 Savings account holders about the new product and instead worked to keep them in the dark about these higher-paying accounts," the CFPB said in a statement following the lawsuit. It comes as savers benefit from the Federal Reserve's decision to raise interest rates in response to soaring inflation, allowing banks to launch high-interest savings accounts after years of low rates.
Capital One said it strongly disagrees with the CFPB's accusations and plans to "vigorously defend" it in court. The banking giant added that it is "deeply disappointed to see the CFPB continue its recent pattern of filing last-minute lawsuits before changes in administration."
Capital One also insists that all of its 360 banking products "offer preferential rates" and are "always available within minutes to all new and existing customers, without any usual industry restrictions."
The actions meant Capital One "unlawfully avoided paying billions of dollars in interest to millions of consumers," the CFPB wrote in Tuesday's complaint. The agency said it is seeking civil penalties and providing financial relief to those affected.
“Banks should not lure people with promises they can’t deliver,” CFPB Director Rohit Chopra said in a prepared statement.
According to the Capital One website, the current interest rate on the 360 Savings Account is just under 0.50%. The interest rate on the 360 Performance Savings Account is approximately 3.74%.
This means that 360 Performance Savings' rates are nearly 7.5 times higher than current 360 Savings. But the CFPB said they have been far apart in the past. In July 2024, 360 Performance Savings' rate was more than 14 times that of 360 Savings, the agency noted in Tuesday's complaint.
The CFPB said Capital One kept the interest rate on its 360 Savings account at 0.30% from December 2020 until at least August 2024. In comparison, 360 Performance Savings' rates climbed from 0.40% in April 2022 to 4.35% in April 2022. The agency noted on Tuesday that it would fall slightly to 4.25% in August by early 2024.
The CFPB's complaint against Capital One comes less than a week before President-elect Donald Trump's Jan. 20 inauguration. Despite the change in administration, some say the lawsuit is still likely to continue.
Analyst commentary from TD Cowen on Tuesday noted that the CFPB is still pursuing enforcement actions during Trump's first term, although such lawsuits may also be easier to resolve under the incoming administration.