New York Attorney General Letitia James has filed a lawsuit against Capital One, alleging the bank deliberately kept customers in the dark about significantly higher interest rates available on a different savings account product, potentially costing consumers millions in lost interest income.
Key Takeaways
- Capital One allegedly maintained a deceptive “two-tier” savings account system, offering 0.30% interest on “360 Savings” accounts while secretly providing 4.35% on “360 Performance Savings” accounts
- The difference in rates meant a $10,000 deposit would earn just $186 in the old account versus $1,090 in the performance account over five years
- Bank employees were reportedly instructed not to inform customers about the higher-yield account unless specifically asked
- Capital One denies the allegations and plans to “vigorously defend” itself in court
- The lawsuit comes as Capital One prepares to complete its $35.3 billion acquisition of Discover Financial Services
Deceptive Marketing Practices Alleged
The lawsuit, filed in federal court in Manhattan on May 14, accuses Capital One of operating a scheme that effectively traps long-time customers in low-yield savings accounts while offering significantly better rates to new customers. According to the complaint, Capital One marketed its original “360 Savings” accounts as high-interest options but later introduced “360 Performance Savings” accounts with substantially higher rates without properly informing existing customers of the option to switch.
While the original accounts earned as little as 0.30% interest, the newer performance accounts offered rates up to 4.35%. This disparity created a situation where identical deposits would earn dramatically different returns based solely on which account type the customer held. The lawsuit highlights that a $10,000 deposit would earn only $186 in a “360 Savings” account compared to $1,090 in a “360 Performance Savings” account over a five-year period – a difference that could significantly impact consumers’ financial well-being.
Broken Promises and Hidden Information
The lawsuit points to Capital One’s marketing materials that promised customers their money would “earn much more than what it would in an average savings or money market account” and boldly claimed “there is no catch.” These promises stand in stark contrast to the reality uncovered in the investigation, where customers were allegedly kept in the dark about better options available within the same bank. The lawsuit suggests the bank actively worked to maintain this information gap.
“Customers opened and maintained 360 Savings accounts based on Capital One’s promises that they would receive ‘one of the nation’s best savings rates,'” states the complaint filed in federal court Stated by, Letita
According to the lawsuit, Capital One employees were specifically instructed not to inform existing “360 Savings” customers about the availability of the higher-yield account option unless directly asked. This directive effectively ensured many customers remained unaware they were missing out on substantial interest income, even as rising national interest rates should have benefited their savings accounts.
Bank Denies Allegations as Legal Battle Begins
Capital One has firmly denied the allegations brought by the New York Attorney General’s office. The bank insists its practices were transparent and that the higher-yield account option was readily available to all customers who sought it out. Capital One’s market position has already been affected by the lawsuit, with shares falling 1.9% on the day the legal action was announced.
“We strongly disagree with the attorney general’s claims and will vigorously defend ourselves in court,” Capital One said in a statement. The bank also claimed the higher-interest account “has always been available in just minutes to all new and existing customers without any of the usual industry restrictions” Stated by, General James
The timing of this lawsuit is particularly notable as Capital One is set to complete a massive $35.3 billion acquisition of Discover Financial Services on May 18. The legal proceedings could potentially complicate this major corporate move and further impact investor confidence. The New York Attorney General’s office is seeking civil penalties against Capital One and restitution for affected customers, which could amount to millions of dollars in compensation.
A Pattern of Banking Practices Under Scrutiny
This lawsuit is not the first time Capital One’s savings account practices have faced legal challenges. The complaint follows a similar case that was previously dropped by the Consumer Financial Protection Bureau after a leadership change. Additionally, Capital One recently settled private litigation regarding the “360 Savings” accounts, though the terms of that settlement remain undisclosed.
With $318 billion in consumer banking deposits as of December 2024, Capital One’s practices impact a vast number of American consumers. Attorney General James has made it clear that her office aims to hold Capital One accountable and secure appropriate restitution for New Yorkers who may have been misled by the bank’s marketing practices and deprived of the opportunity to earn higher interest rates on their hard-earned savings.
