Baring its now sharp teeth again, the Consumer Financial Protection Bureau (CFPB) has filed a lawsuit against Capital One, and its parent company, Capital One Financial Corp., accusing the bank of misleading millions of consumers and costing them more than $2 billion in lost interest.
CFPB sues Capital One
The allegations centre around Capital One’s flagship “360 Savings” account, which the bank promoted as offering some of the nation’s “best” and “highest” interest rates.
Capital One then froze rates at a low level of just 0.30% as deposit rates rose nationwide, while introducing a similar product with significantly higher pay-outs.
Two Products, Two Tiers
The CFPB alleges that Capital One deliberately kept its “360 Savings” accountholders in the dark about its newer “360 Performance Savings” product.
The newer account offered significantly higher interest rates – more than 14 times higher at certain points – but existing 360 Savings customers were not informed of its availability.
From 2019 to mid-2024, Capital One reportedly froze the interest rate on 360 Savings accounts at just 0.30%.
By comparison, the 360 Performance Savings account’s rate climbed from 0.40% in April 2022 to 3.30% by January 2023 and 4.35% as of January 2024.
The CFPB asserts that Capital One intentionally obscured the existence of 360 Performance Savings, replacing nearly all references to 360 Savings on its website and excluding its accountholders from marketing campaigns promoting the higher-yielding account.
Additionally, Capital One allegedly forbade employees from proactively informing 360 Savings customers about the 360 Performance Savings product.
Misleading Marketing Practices
The CFPB claims that Capital One violated the Truth in Savings Act by misrepresenting the 360 Savings account as a “high interest” product.
The bank promoted it as offering “one of the nation’s” top rates, attracting customers with promises of superior returns.
Instead, customers were left earning below-market rates while the bank used the newer 360 Performance Savings account to attract fresh deposits.
CFPB Director Rohit Chopra criticised the bank’s practices, stating, “The CFPB is suing Capital One for cheating families out of billions of dollars on their savings accounts. Banks should not be baiting people with promises they can’t live up to.”
Capital One’s alleged misconduct marks a stark contrast to the legacy of its 2012 acquisition of ING Direct USA, a pioneer in offering competitive savings account rates.
Rebranded as 360 Savings in 2013, the product initially upheld ING Direct’s reputation but later faltered under Capital One’s stewardship.
CFPB’s Goals and Next Steps
The CFPB aims to halt what it describes as Capital One’s “unlawful conduct,” secure redress for affected consumers and impose civil monetary penalties.
Any fines collected would be directed to the CFPB’s victims relief fund to compensate impacted customers.
The lawsuit highlights the importance of transparency in financial services and underscores the risks consumers face when relying solely on banks’ promotional claims.
Customers are encouraged to routinely review their accounts and explore other options to ensure they are receiving competitive rates.
The Broader Implications
As the CFPB takes legal action, this case serves as a warning to financial institutions about the consequences of prioritising profits over consumer trust.
The outcome of this case could have far-reaching implications, not just for Capital One but for the broader banking industry, as regulators continue to scrutinise how institutions treat their customers.
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