Capital One Accused of Defrauding Customers of $2B in Interest.
Capital One is facing a lawsuit from the Consumer Financial Protection Bureau (CFPB) for allegedly deceiving consumers regarding its high-interest savings account offerings.
The lawsuit claims that customers incurred losses exceeding $2 billion in potential interest earnings. In a complaint submitted on Tuesday, the CFPB criticized Capital One's marketing and management of its "360 Savings" accounts, which were advertised as providing some of the highest interest rates available in the country.
However, the CFPB contends that Capital One maintained a low interest rate for these accounts for several years, despite a national increase in rates. Additionally, the CFPB points out that the bank introduced "360 Performance Savings," which offered a significantly higher interest rate—at one point, over 14 times greater than that of the original "360 Savings" accounts. This lawsuit arises during a period when savers have benefited from the Federal Reserve's decision to increase interest rates in an effort to combat rising inflation, prompting some banks to launch high-interest savings accounts to attract customers. Conversely, some banks have not raised rates on their savings accounts, resulting in a disparity between low- and high-yield accounts, akin to the situation with Capital One's two products. The CFPB alleges that Capital One marketed these accounts in a manner that obscured their differences and prohibited employees from proactively informing customers with "360 Savings" accounts about the more lucrative "360 Performance Savings" option.
Capital One failed to directly inform holders of 360 Savings accounts regarding the introduction of the new product, opting instead to obscure the existence of these more lucrative accounts, according to a statement from the CFPB. This lawsuit arises during a period when savers have gained advantages from the Federal Reserve's actions to increase interest rates in response to rising inflation, enabling banks to offer high-interest savings accounts after a prolonged period of low rates.
In response, Capital One said that it strongly disagreed with the CFPB's allegations and plans to "vigorously defend" itself in court. The banking giant added that it was "deeply disappointed to see the CFPB continue its recent pattern of filing eleventh-hour lawsuits ahead of a change in administration."
Capital One asserted that all of its 360 banking products "provide excellent rates" and have "consistently been accessible within minutes to both new and existing customers, free from the typical restrictions found in the industry." Billions in lost interest According to the CFPB's complaint filed on Tuesday, these practices resulted in Capital One "illegally evading the payment of billions in interest to millions of consumers." The agency is pursuing civil penalties and aims to offer financial restitution to those affected.
"Banks should not be baiting people with promises they can't live up to," CFPB Director Rohit Chopra said in a prepared statement.
According to information available on Capital One's website, the current interest rate for 360 Savings accounts is slightly below 0.50%, while 360 Performance Savings accounts offer an interest rate of approximately 3.74%. This indicates that the interest rate for 360 Performance Savings is nearly 7.5 times greater than that of 360 Savings at present.
However, the Consumer Financial Protection Bureau (CFPB) has indicated that the disparity has been more pronounced in the past. In July 2024, as noted in the agency's complaint filed on Tuesday, the interest rate for 360 Performance Savings was over 14 times that of 360 Savings. The CFPB claims that Capital One maintained the interest rate for its 360 Savings accounts at 0.30% from December 2020 through at least August 2024.
In contrast, the rate for 360 Performance Savings increased from 0.40% in April 2022 to a peak of 4.35% at the beginning of 2024, before slightly decreasing to 4.25% by August, as reported by the agency on Tuesday. The CFPB's legal action against Capital One comes just days before the inauguration of President-elect Donald Trump on January 20. Despite the anticipated change in administration, some analysts believe that this litigation may still proceed.
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