Capital One Faces Lawsuit for Deceptive Practices in Savings Accounts
Capital One (COF.N) was sued on Wednesday by New York Attorney General Letitia James, who accused the bank of defrauding customers by misleading them about interest rates on its flagship “high interest” savings accounts. The lawsuit claims that Capital One deceived depositors into believing they were receiving one of the highest savings rates in the country, only to freeze their rates at 0.30% despite rising interest rates nationwide.
Failure to Update Interest Rates and Lack of Transparency
The lawsuit, filed in Manhattan federal court, alleges that Capital One misled customers who opened 360 Savings accounts with the promise of high returns. Instead, their rates remained stagnant at just 0.30% even as other banks increased their interest rates. Furthermore, in September 2019, Capital One launched 360 Performance Savings accounts offering rates as high as 4.35%. However, the bank allegedly failed to inform existing 360 Savings account holders that they could earn more by switching accounts.
Alleged Deception and Concealment of Information
According to the complaint, Capital One employees were instructed not to inform customers about the potential benefits of switching to 360 Performance Savings unless customers specifically inquired. This lack of transparency is at the heart of the lawsuit, with Attorney General James claiming that Capital One took advantage of its customers, counting on their lack of awareness.
Capital One Responds to Allegations
In response to the lawsuit, Capital One denied the accusations, stating, “We strongly disagree with the attorney general’s claims and will vigorously defend ourselves in court.” The company also pointed out that the 360 Performance Savings account has always been available to both new and existing customers without the usual industry restrictions, and that the account currently offers a yield of 3.6%.
New York’s Consumer Protection Lawsuit
The lawsuit, which was filed under New York’s consumer protection laws, seeks civil fines and restitution for affected customers. James emphasized that her legal action was necessary to hold Capital One accountable after the U.S. Consumer Financial Protection Bureau (CFPB) dropped a similar lawsuit in February, following changes in leadership and the return of President Donald Trump to office.
Previous Legal and Financial Developments
In addition to the ongoing legal battles, Capital One recently settled a private nationwide litigation over the 360 Savings accounts in Alexandria, Virginia. The terms of that settlement have not been disclosed. The company is also in the process of completing its $35.3 billion acquisition of Discover Financial Services, expected to be finalized on May 18.
Case Information
The lawsuit is officially titled “New York v. Capital One NA et al,” and is being heard in the U.S. District Court for the Southern District of New York under case number 25-04037.