Capital One to distribute $425 million to affected customers

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Capital One has recently come under scrutiny due to a class-action lawsuit that accused the bank of maintaining higher interest rates for certain customers, resulting in lost earnings for depositors. This legal action has culminated in a significant settlement, with Capital One agreeing to pay $425 million to affected clients. The lawsuit highlighted the bank’s alleged failure to inform customers about more lucrative savings options, which could have provided better returns.

The lawsuit specifically targeted Capital One’s handling of its 360 Savings accounts. Customers claimed that the bank froze the annual percentage yield (APY) at a low level, even as rates increased nationwide. This was compounded by the introduction of the 360 Performance Savings account, which offered higher returns. However, the bank allegedly did not inform existing 360 Savings account holders about this new product, leading to accusations of deceptive practices.

The Consumer Financial Protection Bureau (CFPB) accused Capital One of misleading consumers and violating the Truth in Savings Act. The CFPB alleged that the bank actively worked to maintain a two-tier system, preventing existing customers from accessing higher interest rates. This resulted in Capital One avoiding over $2 billion in additional interest payments to millions of customers.

Despite the CFPB’s involvement, the $425 million settlement was reached through a class-action lawsuit, not directly through the CFPB. Earlier this year, the Trump administration dismissed the CFPB’s case against Capital One, which could have led to even more substantial financial penalties for the bank.

The timing of the settlement coincides with Capital One’s acquisition of Discover Financial Services, which was completed on May 18. This acquisition marks a significant expansion for the bank, even as it navigates the fallout from the lawsuit.

Eligibility for compensation from the settlement applies to both current and former customers who held a Capital One 360 Savings account since September 18, 2019. This date marks the launch of the 360 Performance Savings product, which offered higher interest rates.