ALEXANDRIA, Va. (CN) — A federal agency claims Capital One deceived its customers into believing a savings account provided one of the nation’s best interest rates even as it illegally dodged paying $2 billion in interest.
The case, brought by the Consumer Financial Protection Bureau on Tuesday, charges that Capital One violated law with false claims about its flagship high-interest savings account 360 Savings. After promising accountholders that the product provided one of the nation’s best interest rates, it froze the rate at a low level during a period when rates were rising nationwide, the agency claims.
Along with monetary relief, the bureau asks the court to enjoin the bank from committing future violations.
A bank spokesperson denied wrongdoing. “We are deeply disappointed to see the CFPB continue its recent pattern of filing eleventh-hour lawsuits ahead of a change in administration,” the spokesperson said in a statement. “We strongly disagree with their claims and will vigorously defend ourselves in court.”
But Bartlett Naylor, financial policy advocate for the nonprofit Public Citizen, said the bureau’s action may be the right course. “Banks that deceive customers out of billions on their savings accounts should face severe penalties. As the federal government continues to review whether to allow Capital One’s bid to become the nation’s sixth largest bank with its proposed Discover acquisition, regulators must weigh the CFPB’s allegations carefully,” Naylor said in a statement. “From the mega-bank mortgage frauds that led to the 2008 financial crisis to the many documented Wells Fargo abuses, America doesn’t need another malefactor that’s too big to keep honest.”
The case stems from the 2012 acquisition by Capital One Financial Corp. of the online bank ING Direct USA. Assets included an online savings product, ING Direct, which had higher-than-average interest rates, the bureau says in the lawsuit. One year later, Capital One rebranded the ING product as 360 Savings and migrated accountholders to the new service.
Capital One’s website also promised that “360 Savings has no fees, no minimums and no catches. Your money will earn much more than what it would in an average savings or money market account . . . . What’s the catch? There is none.”
With such assurances, the bank led accountholders to believe they did not need to closely monitor the rate on their accounts, the bureau says.
Capital One ceased offering 360 Savings to new customers in 2019 and replaced it with another product, the “high yield” 360 Performance Savings. “This new savings product was identical to 360 Savings in every material way — the bank marketed both products as high-interest or high-yield online savings accounts and gave them the same terms and conditions, including a variable interest rate, no minimum balance, and no monthly fees — with one exception: 360 Performance Savings has always had a substantially higher interest rate. In July 2024, for instance, the 360 Performance Savings rate was over 14 times the 360 Savings rate.”
The two products had similar names, and eventually, the bank eliminated references to 360 Savings on its website. It didn’t disclose that 360 Savings continued to exist as a distinct product, the bureau says — thus implying the products were the same.
Then, starting in December 2020, the bank froze the 360 Savings rate at 0.3%, even as savings account interest rates across the country rose, the bureau says in its complaint. By December 2022, that rate was at or below the national average money market and savings account rates published by the Federal Deposit Insurance Corporation.
Capital One avoided paying millions of 360 Savings accountholders more than $2 billion in interest it would have had to pay them had they opened 360 Performance Savings accounts, the bureau says in the complaint.
“The CFPB is suing Capital One for cheating families out of billions of dollars on their savings accounts,” CFPB Director Rohit Chopra said in a statement. “Banks should not be baiting people with promises they can’t live up to.”