Status of federal agency’s lawsuit against Capital One unclear

A lot has happened since Jan. 20, as the Trump White House employs “shock and awe” tactics at lightning speed. Among the consequences is the shutdown of the Consumer Financial Protection Bureau, a government watchdog over private industry.

Specifically, the CFPB’s pause in work leaves in question a major federal lawsuit against McLean-headquartered Capital One and its parent company, Capital One Financial, filed in the U.S. District Court for the Eastern District of Virginia.

On Jan. 14, in the waning days of the Biden administration, the CFPB filed suit in federal court against the credit card giant and its holding company, alleging the companies cheated millions of consumers out of more than $2 billion in interest payments.

The CFPB alleged 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.

Capital One responded with a statement last month following the filing: “We are deeply disappointed to see the CFPB continue its recent pattern of filing eleventh-hour lawsuits ahead of a change in administration. We strongly disagree with their claims and will vigorously defend ourselves in court.”

Just over a week later, Donald Trump entered office and since then has issued dozens of executive orders, some of which shut down entire government agencies, including the CFPB. The bureau’s director, Rohit Chopra, was fired, and Trump named Office of Management and Budget Director Russell Vought as its acting director on Friday, Feb. 7.

Over the weekend, the agency, which has a mission to protect consumers in the financial sector, reportedly sent multiple missives to workers telling them that its Washington, D.C., headquarters were closed and that they should not do any work.  On Monday, the White House issued a news release calling the CFPB, which was created by Congress in 2010 in response to the 2008 banking crisis, a “woke, weaponized arm of the bureaucracy that leverages its power against certain industries and individuals disfavored by so-called ‘elites.’”

“Under the administration of President Donald J. Trump, the weaponization ends right now,” the release stated.

What that means for the lawsuit

CFPB’s case against Capital One remains on the docket at the U.S. District Court of the Eastern District of Virginia’s Alexandria courthouse. However, several legal experts have speculated publicly that any CFPB enforcement actions will be shut down.

On Feb. 4, attorneys representing CFPB filed a request for an emergency motion for a temporary stay of deadlines related to whether the case should be consolidated with a class-action multidistrict lawsuit brought by Capital One 360 Savings accountholders “to promote consistency with the goals of the new Administration.”

A judge denied the motion for a temporary stay and gave the CFPB until Friday to file its position on consolidation.

“I’m very curious to see what happens tomorrow and how the bureau is going to proceed, because they’re in a court that moves very quickly and they want to know the CFPB’s position about how they’re going to move forward, but it doesn’t seem like they’re really willing to accommodate too many extensions to hear from the CFPB about that,” explained Erin Witte, the director of consumer protection for the Consumer Federation of America (CFA), a Washington, D.C., association of nonprofit consumer organizations.

Witte shrugged off the fact that the lawsuit was filed in the final days of the Biden administration.

“It’s clear Capital One intentionally steered their customers out of a product that would have paid them more money, and they did it in a way that made it difficult for their account orders to figure out that that was even happening,” she said. “I mean, this is not a political football. This is a pretty clear violation of law when you read the allegations.”

Neither attorneys representing Capital One Financial in the lawsuit or the company’s spokespeople or the media office for the CFPB responded Thursday to requests for comment.

U.S. Sen. Mark Warner, Virginia’s senior Democratic senator, said Thursday in a media availability that he doesn’t follow individual actions filed by the CFPB, when asked about the Capital One lawsuit.

“In certain areas, I think they were very aggressive,” Warner said. “I have no problem with CFPB doing its job, but do it the way where you try to work with the litigant first.”

Warner pointed to the CFPB’s report that it has returned billions of dollars to consumers through law enforcement activity since its creation.

“What I do have the problem with is an organization that’s returned over $20 billion to consumers because of fraud, because of rip-off scams, arbitrarily being shut down with no warning,” he said. “I mean, what happens if it’s the FBI next? What happens if it’s…. [the] Environmental Protection Agency, just because it’s in the political crosshairs of some of the very wealthy folks who make up the Trump administration.”

Warner said that if President Trump wants to reform CFPB or any federal entity, he should present his ideas to the U.S. Congress, rather than taking unilateral action.

“Then we can try to come to agreement,” Warner said. “What we can’t come to is by executive fiat and a stroke of a pen, this president dismantling wide swaths of government that have broad bipartisan support. That’s just not the way the Constitution and system works.”

The CFPB’s shutdown comes amid fast-moving agency takeovers by Trump adviser Elon Musk, the world’s richest man and head of the newly created Department of Government Efficiency, or DOGE. Although some federal judges have put injunctions in place, Musk and his DOGE aides have received access to sensitive federal data, including personal and financial information of the nation’s more than two million federal workers.

Trump has given Musk the authority to cut the federal workforce and spending in many sectors, although the U.S. Post Office, military branches and border enforcement are mostly immune to cuts.

In the Feb. 10 press release, the Trump White House made several claims about the CFPB, including that in the waning hours of the Biden administration, “it gave itself the authority to regulate Americans’ checking accounts by dictating government price controls and unilaterally buried $50 billion in medical debt.”

That was in reference to the CFPB’s finalizing a rule in January under Biden that would keep medical debt from being included on credit reports. It was set to take effect in March. However, an executive order issued by Trump paused all rulemaking activity for 60 days.

Pushback on CFPB’s closure

The CFA issued a press release Sunday noting Congress transferred consumer financial protection functions to the CFPB when it formed. “Unless Congress passes legislation, the suspension of supervisory work by the CFPB will not result in those responsibilities being returned to the agencies that formerly had them,” the association stated.

“The CPFB was created after excessive risk-taking by financial companies, many of whom were not supervised by a federal regulator, crashed our economy,” Adam Rust, CFA’s director of financial services, said of the CPFB’s shuttering in a statement. “Millions of people lost their homes, work, savings, and businesses. It was created to protect people, not empower Elon Musk. If this administration chooses to cover its eyes from the facts, people will be put in harm’s way. This is a free pass for financial institutions to take advantage of consumers.”

The National Treasury Employees Union filed two federal lawsuits Sunday against Vought, alleging that “the administration has unlawfully trampled the power of Congress to create a federal agency that it deemed necessary to protecting American consumers” and that the CFPB violated the Privacy Act by disclosing employee records to the U.S. Department of Government Efficiency.

Associate Editor Katherine Schulte contributed to this article.