New York has filed a lawsuit against Capital One N.A. and Capital One Financial Corporation (Capital One) for allegedly cheating its online savings account customers out of millions of dollars in interest payments. The lawsuit alleges that Capital One marketed its “360 Savings” accounts as “high interest” accounts with “one of the nation’s best savings rates” that would earn its customers more than an average savings account. According to Attorney General Letitia James, while interest rates rose nationwide, Capital One kept the interest rates for its 360 Savings accounts artificially low. The suit claims Capital One created “360 Performance Savings,” a nearly identical type of savings account that provided much higher interest rates than 360 Savings – at one point, more than 14 times higher. AG James states Capital One intentionally misled its 360 Savings customers about the existence of its 360 Performance Savings product to avoid paying them millions of dollars in interest.
“New York families work hard to save money for their futures, and they deserve every dollar of interest they are promised,” said Attorney General James. “Capital One assured high returns with no catches, then pulled the rug out from under their customers and hoped nobody would notice. Big banks are not allowed to cheat their customers with false advertising and misleading promises. I will always fight to protect New Yorkers’ wallets and prevent banks from ripping off consumers to boost their own bottom lines.”
A high-interest savings account is a bank account that pays depositors a higher interest rate than a traditional savings account. Capital One marketed 360 Savings as its “high interest” savings account product with “a great everyday rate,” promising customers: “Your money will earn much more than what it would in an average savings or money market account…What’s the catch? There is none.”
According to the State Comptroller’s Office, beginning in September 2019, Capital One introduced a new type of savings account called 360 Performance Savings that paid much higher interest rates. As interest rates rose nationwide beginning in 2022, Capital One froze its 360 Savings rate at 0.3 percent and increased its 360 Performance Savings rate to as high as 4.35 percent, leaving 360 Savings customers with a below-average interest rate. Instead of encouraging 360 Savings customers to upgrade their existing accounts, Capital One worked to keep them in the dark about the availability of the new product.
As Attorney General James alleges in the lawsuit, while Capital One promoted its 360 Performance Savings accounts to existing customers, it did not notify its 360 Savings customers of the chance to earn more interest. Capital One even instructed its employees not to tell 360 Savings customers about the new product unless they explicitly asked.
Capital One removed 360 Savings from its website and completely replaced it with 360 Performance Savings, concealing that 360 Savings and 360 Performance Savings existed as separate and distinct products with different interest rates. By doing so, Capital One created a secret, two-tier system of savings accounts in which only new accounts received the high interest rates that Capital One advertised.
With compound interest, even a small difference in rates adds up over time to create large differences in savings, meaning customers who stayed in 360 Savings accounts lost out on significant interest payments. A customer who put $10,000 in a 360 Savings account in September 2019 would have earned $186 of interest after five years. If the same customer had switched to a 360 Performance Savings account, they would have earned $1,090 of interest over the same period. Collectively, New York customers lost out on millions of dollars of interest compared to what they would have received with 360 Performance Savings accounts, while Capital One pocketed the difference.
Attorney General James alleges Capital One’s actions violate state and federal law by misleading customers about whether 360 Savings was Capital One’s only high-interest savings account, and about the interest rate for 360 Savings accounts. The Consumer Financial Protection Bureau sued Capital One in January over similar allegations, but voluntarily dropped its lawsuit, along with a slew of other lawsuits, after a change in leadership. The action brought by Attorney General James seeks to ensure that Capital One does not escape accountability, by seeking restitution and damages for all affected Capital One customers, disgorgement of profits Capital One made by illegally misleading its customers, and penalties.
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