In a lawsuit filed this week, the Consumer Financial Protection Bureau alleged that Capital One – a large U.S.-based bank – failed to pay more than $2 billion in interest to consumers. These allegations are centered on the bank’s “360 Savings” product.
Capital One was founded in the 1990s and has since become one of the 10 largest banks in America, per its website. By last September, the McLean, Va.-headquartered bank and its subsidiaries had $353.6 billion in deposits and $486.4 billion in total assets.
According to the CFPB, Capital One acquired online bank ING Direct USA in 2012. Along with this acquisition came an online savings product called “ING Direct,” that was known for having higher-than-average interest rates. In 2013, Capital One rebranded “ING Direct” as “360 Savings” and started offering the product to the general public.
These “360 Savings” accounts were marketed as “high interest” accounts with variable interest rates and as “one of the nation’s” “top,” “best,” and “highest,” types of accounts. Per the CFPB, the bank indicated that the “360 Savings” accounts would earn much more interest than average savings accounts.
“It also assured former ING Direct savings accountholders that, with 360 Savings, they would ‘still have great rates,’” the bureau said.
Then, from late 2019 through the middle of last year, Capital One allegedly froze the “360 Savings” rate to 0.30%, even as rates increased nationwide. At the time, the bank had already launched a new product, the similarly named “360 Performance Savings” accounts.
According to the CFPB, the only difference was that the new “360 Performance Savings” paid out substantially more in interest than the older product. It alleges that, as the “360 Savings” account rates were frozen that Capital One began increasing the “360 Performance Savings” rates in early 2022. From April of that year to January 2023, the rate increased from 0.40% to 3.30%. It was up to 4.35% last January and at “one point was more than 14 times,” the rate of the “360 Savings” product, said the bureau.
“Capital One did not specifically notify ‘360 Savings’ accountholders about the new product, and instead worked to keep them in the dark about these better-paying accounts,” the CFPB said.
Although Capital One named and marketed the two products similarly, it allegedly eventually eliminated nearly all references to the “360 Savings: account product on its website and replaced them with references to the “360 Performance Savings” account. The bank also excluded those with “360 Savings” accounts from a marketing campaign advertising “360 Performance Savings” and forbade employees from proactively selling the new product to people with the old accounts, per other allegations from the CFPB.
“The CFPB is suing Capital One for cheating families out of billions of dollars on their savings accounts,” said CFPB Director Rohit Chopra. “Banks should not be baiting people with promises they can’t live up to.”
“The Bureau alleges that by misrepresenting the interest rate for the 360 Savings product, Capital One violated the Consumer Financial Protection Act of 2010’s (CFPA) prohibition on deceptive acts and practices,” said the bureau. It also alleged that the ban violated the Truth in Savings Act and Regulation DD.
Through the Consumer Financial Protection Act, the CFPB has the authority to take action against institutions that violate consumer financial protection laws. It now seeks to stop Capital One’s alleged “unlawful conduct, provide redress for harmed consumers, and impose civil money penalties, which would be paid into the CFPB’s victims relief fund.”
“We strongly disagree with their claims and will vigorously defend ourselves in court,” said a Capital One spokesperson regarding the bureau’s claims, according to an Axios report. That spokesperson also slammed the bureau for filing a lawsuit shortly before a changeover in presidential administrations.
Axios noted that President-elect Donald Trump is expected to be less “friendly” to the CFPB than President Joe Biden. It also noted that the suit may impact Discover’s attempts to acquire Capital One. The bank plans to release fourth quarter earnings results next Tuesday.