CFPB sues Capital One, claiming bank avoided paying $2B in interest

The Consumer Financial Protection Bureau has sued Capital One and its McLean holding company, Capital One Financial, alleging the companies cheated millions of consumers out of more than $2 billion in interest payments, the federal agency announced Tuesday.

Capital One, the CFPB alleges, promised customers that its flagship 360 Savings account provided one of the nation’s “best” and “highest” interest rates, but the bank froze the interest rate at a low level while rates rose nationwide.

Specifically, the CFPB alleges that Capital One misled consumers about “high interest” accounts, claiming Capital One Financial illegally deceived consumers and that Capital One N.A. — a national bank and wholly owned subsidiary of Capital One Financial — violated the Truth in Savings Act by falsely representing the 360 Savings accounts as providing a variable interest rate that was “one of the nation’s” “top,” “best” and “highest” and that customers would earn much more interest than with the average savings account.

Second, the CFPB alleges that Capital One “kept consumers in the dark to maintain a two-tier system,” misrepresenting to existing customers that its 360 Savings accounts would be the bank’s only high-interest savings product, despite introducing the newer 360 Performance Savings account, which had the same terms, conditions and features but a higher interest rate than 360 Savings.

While attracting new customers with 360 Performance Savings accounts and not paying existing 360 Savings customers the higher interest income they were promised, Capital One avoided paying customers more than $2 billion, the CFPB claims.

In response, Capital One noted the timing of the federal lawsuit, which comes less than a week before President-elect Donald Trump takes office Jan. 20, with new leadership and focuses at CFPB expected.

“We are deeply disappointed to see the CFPB continue its recent pattern of filing eleventh-hour lawsuits ahead of a change in administration,” the company said in a statement. “We strongly disagree with their claims and will vigorously defend ourselves in court.”

In November 2024, Elon Musk wrote in a post on the social media platform X, formerly Twitter, “Delete CFPB. There are too many duplicate regulatory agencies.” Owner of X and Tesla, Musk is one of two co-leaders of Trump’s Department of Government Efficiency.

“Capital One is proud of its unique and industry-leading 360 suite of banking products,” the Capital One statement continued, “all of which offer great rates, carry no fees and no minimums, and have always been available in just minutes to all new and existing customers without any of the usual industry restrictions.”

CFPB Director Rohit Chopra said in a statement: “The CFPB is suing Capital One for cheating families out of billions of dollars on their savings account. Banks should not be baiting people with promises they can’t live up to.”

Capital One disclosed the CFPB investigation in an October 2024 filing.

Details of the allegations

In 2012, Capital One acquired online bank ING Direct USA for $6.3 billion in cash and approximately 54 million Capital One shares. The acquisition included its savings account product ING Direct, which, according to the CFPB, was known for having higher-than-average interest rates. In 2013, Capital One rebranded the product as 360 Savings and began offering it to the general public.

When Capital One launched 360 Performance Savings in September 2019, the company set the product’s interest rate at 1.90%, while the 360 Savings product’s interest rate was 1%, according to the CFPB complaint. Between late 2019 and late 2020, Capital One dropped the 360 Performance Savings rate to 0.40% and the 360 Savings rate to 0.30%.

From December 2020 to at least August 2024, Capital One froze the 360 Savings account rate at 0.30%, according to the CFPB, but began increasing the 360 Performance Savings account rate in early 2022. The interest rate for the latter product increased from 0.4% in April 2022 to 3.3% in January 2023 and then 4.35% in January 2024, according to the CFPB news release.

Related to the second allegation, the CFPB claims that Capital One obscured that the 360 Performance Savings accounts existed as a separate product with a higher rate from 360 Savings accountholders, by eliminating nearly all references to the 360 Savings account product on its website and replacing them with references to the 360 Performance Savings account product and forbidding employees from proactively telling 360 Savings accountholders about 360 Performance Savings accounts.

In the provided statement, a Capital One spokesperson said, “Our flagship 360 Performance Savings product was marketed widely, including on national television, with the simplest and most transparent terms in the industry. It’s why we’ve been ranked No. 1 by JD Power in Overall Customer Satisfaction among all national banks for five years in a row.”

According to a news release, “The CFPB seeks to stop Capital One’s unlawful conduct, provide redress for harmed consumers and impose civil money penalties, which would be paid into the CFPB’s victims relief fund.”

The CFPB filed a demand for jury trial with its complaint filed Tuesday in the U.S. District Court for the Eastern District of Virginia.

Additional context

Capital One 360 Savings accountholders filed a class action lawsuit against Capital One in the same court in July 2023, and claims were consolidated in June 2024, according to Forbes. A jury trial is scheduled for July, although Capital One has filed to dismiss the complaint.

Capital One has proposed acquiring Discover Financial Services for $35.3 billion, and the acquisition is pending stockholders’ votes.

Jaret Seiberg, an analyst with TD Cowen’s Washington Research Group, wrote in a policy note, “The CFPB today sued Capital One for failing to maintain a higher interest rate on its 360 Savings accounts. This dispute was well known. We do not see it impacting the Discover acquisition.”

As of 12:16 p.m., Capital One shares were trading for $181.94, up from $182.45 at market open.

Capital One Financial, along with its subsidiaries, had $353.6 billion in deposits and $486.4 billion in total assets as of Sept. 30, 2024.