How Capital One tricked customers and how to reclaim $2 billion

Capital One has been accused of ‘cheating’ customers out of $2 billion in interest payments on savings accounts. 

The bank, which is among the largest in the US, was sued on Tuesday by the Consumer Financial Protection Bureau (CFPB).

The consumer protection agency stated that Capital One assured its customers that the 360 Savings account offered one of the best interest rates available. However, the bank kept the rate at a low 0.30 percent while national rates increased following the Federal Reserve’s rate adjustments.

Around the same time, Capital One created a virtually identical product, called ‘360 Performance Savings.’

One key difference from the 360 Savings account was that this undisclosed product offered significantly higher interest rates, exceeding the 360 Savings rate by over 14 times at one point.

According to the Consumer Financial Protection Bureau (CFPB), Capital One allegedly failed to inform 360 Savings account holders about this new account and purportedly strategized to conceal these higher-paying options from them.

‘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.’

The watchdog is seeking compensation for affected customers in its lawsuit, which it expects to win.

It comes a year after customers sued the bank over the same issue, claiming they were robbed of ‘millions of dollars’ of lost interest.

Capital One has been accused of ‘cheating’ customers out of $2 billion in interest payments on savings accounts

Capital One said in a statement Tuesday that it is ‘deeply disappointed to see the CFPB continue its recent pattern of filing eleventh hour lawsuits ahead of a change in administration.

‘We strongly disagree with their claims and will vigorously defend ourselves in court.’

A spokesperson added that the new – 360 Performance Savings – account was marketed widely, ‘including on national television, with the simplest and most transparent terms in the industry.’

According to the CFPB, Capital One ‘illegally deceived customers’ about ‘high interest’ rates on the 360 Savings account, by implying that it would earn much more interest than the average account.

It alleges the bank purposefully named and marketed the two products similarly, and excluded 360 Savings accountholders from a marketing campaign advertising 360 Performance Savings to Capital One’s other existing customers.

Capital One is known for its advertisements which feature the so-called ‘Capital One Bank Guy’, singer Taylor Swift and Hollywood actor Jennifer Garner.

The watchdog also says Capital One forbade its employees from proactively telling 360 Savings accountholders about 360 Performance Savings.

The CFPB’s 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.

It is not yet known how much money affected customers could receive if the CFPB wins the lawsuit.

In a lawsuit filed in January 2024, plaintiffs made the same accusations.  

Capital One is known for its advertisements which feature the so-called ‘Capital One Bank Guy’ and Hollywood actor Jennifer Garner

Singer Taylor Swift also starred in a Capital One commercial in 2022

The gray line indicates the Federal Funds Rate set by the US Federal Reserve. Generally, rates on high-interest savings accounts move in line with the Fed’s rate. When rates were low during the Covid pandemic, Capital One locked ‘360 Savings’ account rates at 0.30 percent and boosted rates on a new high-yield savings account with a similar-sounding name

‘The CFPB is suing Capital One for cheating families out of billions of dollars on their savings accounts,’ said CFPB Director Rohit Chopra

One 360 Savings account holder shared a screenshot of the Capital One online portal indicating his deposits were only generating interest of 0.30 percent

Customers holding Capital One’s 360 Savings account claimed the bank froze rates at a low of 0.3 percent and chose not to notify account holders, while creating a new high-yield savings account with a very similar name, which it advertised heavily.

The lawsuit claimed Capital One closed the old low interest-bearing 360 Savings accounts to new customers and eliminated all references to them on their website. 

At the same time, they kept old customers deposits in them, it alleged.

The bank then used the similar-sounding 360 Performance Savings account to offer a competitive and dynamic rate, which rose to 4.35 percent as of January 2024.

From late 2019 to mid-2024, the Federal Reserve hiked benchmark borrowing rates from nearly 0 percent in March 2022 up to to a 22-year-high above 5 percent, before cutting interest rates for the first time in four years in September 2024.

As the Fed raised rates, some high-interest or high-yield savings account holders with other banks enjoyed significantly higher interest on their deposits. 

But Capital One is not the only bank which has been accused of offering customers paltry savings rates as interest rates have risen. 

Last year, DailyMail.com analysis showed that JPMorgan Chase, Bank of America and Wells Fargo failed to raise the annual percentage yield (APY) on their basic savings accounts beyond 0.01 percent.

By comparison, those same banks typically charge between 5 and 7 percent interest on their 30-year fixed-rate mortgages.