Capital One's Billion-Dollar Deception: A CFPB Lawsuit

WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) has filed a lawsuit against Capital One, N.A., and its parent holding company, Capital One Financial Corp., alleging that the bank cheated millions of consumers out of more than $2 billion in interest. The CFPB alleges that Capital One promised consumers that its flagship "360 Savings" account provided one of the nation’s “best” and “highest” interest rates, but the bank froze the interest rate at a low level while rates rose nationwide. Around the same time, Capital One created a virtually identical product, “360 Performance Savings,” that differed from 360 Savings only in that it paid out substantially more in interest—at one point more than 14 times the 360 Savings rate. 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 alleges that Capital One obscured the new product from its 360 Savings accountholders and cost millions of consumers more than $2 billion in lost interest payments.

Capital One's alleged actions significantly impacted the overall interest income of affected customers. According to the CFPB's lawsuit, Capital One froze the interest rate of its "360 Savings" accounts at a low level of 0.30% from late 2019 to mid-2024, even as rates increased nationwide. In contrast, the bank's "360 Performance Savings" accounts saw their rates increase significantly, reaching as high as 4.35% by January 2024. This discrepancy meant that customers with "360 Savings" accounts were not receiving the higher interest rates they were promised, costing them more than $2 billion in lost interest payments. For example, in July 2024, the interest rate for "360 Performance Savings" was more than 14 times higher than that of "360 Savings." This disparity highlights the substantial impact on customers' interest income due to Capital One's alleged actions.

The primary factors contributing to the significant disparity in interest rates between the two account types can be attributed to Capital One's strategic decisions and marketing tactics. From late 2019 to mid-2024, Capital One lowered and then froze the 360 Savings account rate to just 0.30%, even as rates increased nationwide. In contrast, starting in early 2022, Capital One increased the 360 Performance Savings account rate, with the rate going from 0.40% in April 2022 to 4.35% as of January 2024. This increase in interest rate for the 360 Performance Savings account was not extended to the 360 Savings account holders, creating a disparity in interest rates between the two account types. Additionally, Capital One named and marketed the two products similarly, making it difficult for customers to distinguish between them. The bank eliminated nearly all references to the 360 Savings account product on its website and replaced them with references to the essentially identical 360 Performance Savings account, without notice that 360 Savings continued to exist as a distinct product. This tactic helped Capital One keep 360 Savings accountholders in their lower-yielding accounts and maintain a two-tier system, where new depositors received higher interest rates while existing depositors did not.

Capital One's marketing strategies and customer communication practices contributed to the alleged deception in several ways. The bank marketed its 360 Savings account as a "high interest" account with a variable interest rate that was "one of the nation’s" “top,” “best," and “highest,” and would earn much more interest than the average savings account. However, from late 2019 to mid-2024, Capital One lowered and then froze the 360 Savings account rate to just 0.30%, even as rates increased nationwide. This discrepancy between the bank's marketing claims and the actual interest rates offered to customers is a key factor in the CFPB's lawsuit. Additionally, Capital One excluded 360 Savings accountholders from a marketing campaign advertising 360 Performance Savings to its other existing customers, further contributing to the disparity in interest rates between the two account types.

The CFPB alleges that Capital One's actions cost millions of consumers more than $2 billion in lost interest payments. The rate for 360 Performance Savings was as high as 4.35% at the start of 2024, compared to the 0.30% rate for 360 Savings. In July 2024, the 360 Performance Savings rate was more than 14 times that of 360 Savings. This significant disparity in interest rates highlights the substantial impact on customers' interest income due to Capital One's alleged actions.

In conclusion, the CFPB's lawsuit against Capital One alleges that the bank cheated millions of consumers out of more than $2 billion in interest by freezing the interest rate of its "360 Savings" accounts at a low level while rates rose nationwide. The primary factors contributing to the significant disparity in interest rates between the two account types can be attributed to Capital One's strategic decisions and marketing tactics. The bank's marketing strategies and customer communication practices contributed to the alleged deception, with the CFPB alleging that Capital One's actions cost millions of consumers more than $2 billion in lost interest payments. The lawsuit seeks to stop the companies’ unlawful conduct, provide redress for harmed consumers, and impose civil money penalties, which would be paid into the CFPB’s victims relief fund.