News Summary
Capital One has agreed to a $425 million settlement regarding accusations of misleading interest rates associated with its 360 Performance Savings accounts. The federal judge in Virginia must approve the settlement, which aims to compensate customers for lost interest from accounts that advertised higher rates. Customers will receive $300 million to cover potential earnings and an additional $125 million in bonus interest for current account holders. Although Capital One denies wrongdoing, this settlement comes amid increasing scrutiny of financial institutions and their transparency practices.
Virginia
Capital One has reached a $425 million settlement in relation to allegations of misleading interest rates on its savings accounts, following extensive nationwide litigation. The settlement is pending approval from a federal judge in the U.S. District Court for the Eastern District of Virginia.
The class-action lawsuit against Capital One claimed that the bank misrepresented the interest rates associated with its 360 Performance Savings accounts. Customers alleged that while the bank advertised these accounts as having higher interest yields, many depositors were not informed of the fixed rate of 0.3% on the 360 Savings accounts. Instead, some accounts were available that offered rates significantly above 4%.
Under the terms of the settlement, $300 million will be allocated to compensate depositors who lost potential interest earnings from these higher-yield accounts. Additionally, the settlement provides for an extra $125 million to be distributed to customers who currently maintain open 360 Savings accounts as bonus interest.
The settlement will also cover legal fees incurred by the class-action attorneys involved in the case. Notably, Capital One has admitted no wrongdoing in connection with this settlement.
The ongoing case combines several lawsuits initiated across the country against Capital One related to these misrepresentation allegations. Recently, New York Attorney General Letitia James initiated a separate lawsuit against the bank, accusing it of failing to inform 360 Savings account customers about their options to switch to higher-yield accounts. She criticized Capital One for providing misleading assurances about high returns without making clear the conditions.
It is important to note that the continuing lawsuit from the New York Attorney General is not included in the current settlement. Additionally, the Consumer Financial Protection Bureau had previously sued Capital One, alleging that the bank deprived consumers of over $2 billion in interest payments. However, the case was eventually dropped during the Trump administration.
The settlement, should it receive court approval, is aimed specifically at compensating class members who held a Capital One 360 Savings account since September 18, 2019. Payments to class members will vary based on the duration of account ownership and the account balances held during that period. Depositors who switched to 360 Performance Savings or who closed their accounts are also eligible for a portion of the $300 million earmarked for lost interest.
Before any payments can be disbursed to class members, the settlement requires a formal court hearing, where a judge will review and decide on the agreement’s approval. Preliminary filings related to this case must be submitted by June 6, with the hearing planned to follow shortly thereafter.
This case underscores the increasing scrutiny that financial institutions are facing regarding their banking practices and transparency, particularly as interest rates have climbed since 2022. Consumers are increasingly aware of their rights and are motivated to seek redress when financial institutions fail to meet their obligations in delivering accurate information.
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