Home Money & Business Business US regulator files lawsuit against Capital One, claiming the bank defrauded customers of $2 billion.

US regulator files lawsuit against Capital One, claiming the bank defrauded customers of $2 billion.

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US regulator files lawsuit against Capital One, claiming the bank defrauded customers of $2 billion.

NEW YORK — A consumer watchdog has initiated legal action against Capital One, claiming the bank misled customers regarding its high-interest savings accounts and “cheated” them out of over $2 billion in interest payments.

On Tuesday, the Consumer Financial Protection Bureau (CFPB) filed a complaint focusing on Capital One’s promotion and management of its “360 Savings” accounts. The bureau alleges that despite marketing 360 Savings as one of the highest-yield savings accounts available, Capital One maintained a low interest rate for an extended period, even as interest rates across the country increased.

In addition, the CFPB pointed out that Capital One introduced a separate account called “360 Performance Savings,” which offered significantly higher interest rates. The bureau contends that Capital One failed to inform customers with 360 Savings accounts about this new option, alleging that the bank intentionally obscured the differences between the two products and prohibited employees from proactively communicating this information to existing customers.

The CFPB’s complaint states that these actions allowed Capital One to “unlawfully circumvent billions in interest payments owed to millions of consumers.” The agency is seeking to impose fines and provide restitution to those affected by the bank’s practices.

Rohit Chopra, the CFPB Director, criticized Capital One’s actions, emphasizing that financial institutions should not mislead customers with promises that they cannot fulfill.

In response to the lawsuit, Capital One firmly rejected the CFPB’s accusations and announced plans to “vigorously defend” itself in court. The bank expressed disappointment at the CFPB’s tendency to file lawsuits in the wake of administrative changes.

Capital One asserted that all its banking products, including the 360 range, consistently provide competitive interest rates and that customers can access these products easily without conventional industry limitations.

Current information from Capital One’s website indicates that 360 Savings accounts have an interest rate of just below 0.50%, whereas the 360 Performance Savings accounts offer around 3.74%. This disparity illustrates that the interest rate for Performance Savings is approximately 7.5 times that of the basic Savings account today, a gap that has been even wider in the past.

In July 2024, for instance, the CFPB highlighted in its lawsuit that the interest rate for 360 Performance Savings was over 14 times greater than that of 360 Savings. The bureau claims that during the period from December 2020 to at least August 2024, Capital One maintained the 360 Savings account interest rate at 0.30%. In contrast, the interest for 360 Performance Savings increased from 0.40% in April 2022 to as high as 4.35% at the beginning of 2024 before slightly decreasing to 4.25% by August.

The lawsuit against Capital One coincides closely with the upcoming inauguration of President-elect Donald Trump on January 20. Despite the anticipated transition in administration, some analysts suggest that the CFPB could maintain its enforcement actions. TD Cowen analysts noted that similar actions occurred during Trump’s first term, although it may be simpler to reach settlements under the new administration.