The Consumer Financial Protection Bureau (CFPB) has dismissed its lawsuit against Capital One, making it yet another case the newly managed agency has dropped in the last month.
Reports of the Bureau’s move to drop the lawsuit came just as Jonathan McKernan, President Trump’s nominee to lead the agency, was being questioned by Senate Banking Committee members during a nomination hearing.
The CFPB had sued the bank in a Virginia federal court in January, accusing it of freezing the returns on one of its high-yield savings accounts without informing customers of a concurrent better option. The regulator said that 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.
Allegations
It was 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. The CFPB contended that the bank cheated millions of consumers out of more than $2 billion in interest, .
And for its overrepresentation, the agency accused Capital One of violating the Truth in Savings Act/Regulation DD.
Russell Vought, the director of the Office of Management and Budget (OMB), is currently the acting director of the CFPB. Thursday’s court filing was signed by Mark Paoletta, chief legal officer for the CFPB and general counsel for the OMB.
During the Senate hearing, McKernan, who previously served on the board of the Federal Deposit Insurance Corporation, assured senators, particularly Democrats, that he was going to review the cases pending before the Bureau.
Ranking committee member, Senator Elizabeth Warren (D-MA), told McKernan the timing of the announcement to drop the Capital One lawsuit seemed “designed to embarrass you and to show exactly who is in charge of this agency right now: Elon Musk and his little band of hackers.”
Cases dropped, employees departing
Just a week prior, the CFPB dropped its lawsuit against SoLo Funds. In a social media post, Vought called the CFPB’s civil action against SoLo “wrong,” and said “more to come but the weaponization of ‘consumer protection’ must end.”
The Bureau also dropped its cases against Rocket Homes, Pennsylvania Higher Education Assistance Agency, Vanderbilt Mortgage and Finance, and Heights Finance Holding Company, NPR reported.
The CFPB has faced significant turmoil in the past month, with over 100 workers fired and the agency virtually shuttered after staff were told to stop all work. The Bureau’s DC headquarters saw its building’s lease get canceled.
There is essentially no federal regulator conducting anti-consumer-fraud examinations on very large banks such as JPMorgan and Wells Fargo, said a group of 23 state attorneys led by New York Attorney General Letitia James in a court filing.
The AGs did not accuse any banks of wrongdoing, but they contend in their amicus brief in a US court in Maryland that defunding the CFPB “creates a regulatory vacuum even greater than what existed before the Great Recession.”
Overdraft rule faces nullification
The Chairs of the House and Senate committees with jurisdiction over banking issues have introduced Congressional Review Act resolutions to nullify the CFPB’s overdraft rule.
This rule was originally scheduled to go into effect on October 1, but it is being reviewed by the new leadership at the CFPB. And in litigation over the rule, there is a CFPB motion pending that, if granted, would formally delay the effective date until December 30 to provide ample time for that review.
If allowed to go into effect as issued, the rule would limit overdraft fees to $5 at financial institutions with more than $10 billion in assets, unless they set a cap that covers their actual costs or they treat the payment of an overdraft as a loan and offer customers appropriate disclosures.
