The Consumer Finance Protection Bureau has sued Capital One in a Virginia federal court, accusing it of freezing the returns on one of its high-yield savings account without informing customers of a concurrent better option.
In 2019, Capital One stopped offering its high-yield 360 Savings account to customers, and began to offer a similarly-named 360 Performance Savings account.
The CFPB alleged that while Capital One represented the original 360 Savings account to be one of the nation’s “top,” and “best” options, the bank instead kept the account’s interest rate fixed at 0.30%, despite deposit rates increasing across the country. For this overrepresentation, the CFPB accused Capital One of violating the Truth in Savings Act/Regulation DD.
And while interest rates froze on the 360 Savings accounts, they continued to grow on the 360 Performance Savings accounts. There were no advantages to holding the old 360 Savings account, and after issuing the new type, the bank did not open them.
In January 2024, the yields on the 360 Performance Savings account was 4.35% – 14 times higher than the standard 360 Savings account – in line with high-yield account offerings from other major banks. Many customers had no idea that Capital One offered a better option with no downsides.
Deliberate concealment
The CFPB accused Capital One of deliberately concealing that information from customers, including prohibiting its employees from proactively informing customers about the new account offering, in violation of the Consumer Finance Protection Act’s prohibition on abusive acts and practices.
The agency stated that the bank’s opacity was meant to attract new customers at the expense of old ones. The CFPB alleges that in total, the bank netted $2 billion in profits from interest rates it would have paid out if customers migrated their funds into the new account type.
According to the Wall Street Journal, which reported on the scandal in January 2024, 360 Savings account holders who never knew they were getting the short end of the stick lost thousands of dollars in missed interest payments. The CFPB’s lawsuit now joins a class action lawsuit filed by disgruntled customers in July 2024.
“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.”
Capital One responded by taking aim at the lawsuit’s timing, criticizing the CFPB’s “recent pattern of filing 11th-hour lawsuits ahead of a change in administration.”
The CFPB has ramped up enforcement in the final weeks of the Biden administration. It is possible that a new CFPB director will undo many of those lawsuits as the agency comes under fire from prominent Republicans, including Department of Government Efficiency co-chair Elon Musk, who has called for its elimination.
