Capital One cheated its online savings account customers out of millions of dollars in interest payments, New York Attorney General Letitia James claims in a new lawsuit.
The lawsuit alleges Capital One N.A. and Capital One Financial Corporation marketed “360 Savings” accounts as “high interest” with “one of the nation’s best savings rates” and said customer would earn more than with an average savings account. But James alleges that Capital One kept 360 Savings accounts interest rates artificially low while interest rates rose nationwide. At the same time, Capital One created “360 Performance Savings,” a similar savings account that offered interest rates that were much higher than what was available with 360 Savings – up to 14 times higher, according to a news release from the New York Attorney General’s Office.
Capital One deliberately misled customers using its 360 Savings about the existence of its 360 Performance Savings to avoid paying out millions of dollars in interest to them, the lawsuit states. James is calling for Capital One to provide restitution to account holders who were allegedly cheated out of the interest they thought they were earning.
“New York families work hard to save money for their futures, and they deserve every dollar of interest they are promised,” James said in the news release. “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.”
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.”
Beginning in September 2019, Capital One introduced the 360 Performance Savings account, which paid much higher rates. As interest rates increased nationally starting in 2022, Capital One froze the rate for 360 Savings at 0.3% while increasing its 360 Performance Savings rate to as high as 4.35%, so 360 Savings customers were getting a below-average interest rate, the suit alleges. Capital One “worked to keep them in the dark about the availability of the new product,” James alleges.
Capital One promoted its 360 Performance Savings accounts to existing customers but did not inform 360 Savings account holders of the opportunity to earn higher interest, the suit says. The bank allegedly directed its employees not to tell 360 Savings customers about the new account unless they asked.
Capital One took 360 Savings off its website and replaced it with 360 Performance Savings, hiding that 360 Savings and 360 Performance Savings were separate and distinct products with different interest rates, according to the suit. “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,” the Attorney General’s Office stated.
Citing the effect of compounding interest, the suit says customers who remained with 360 Savings accounts lost out on “significant” interest payments. A 360 Savings account holder who put $10,000 in September 2019 would have earned $186 in interest after five years. The same amount over the same period in a 360 Performance Savings account would have earned $1,090. James alleges that New York customers collectively lost out on millions of dollars of interest compared with what they would have earned with 360 Performance Savings accounts.
According to the New York state lawsuit, Capital One violated state and federal law by misleading customers. The federal Consumer Financial Protection Bureau sued Capital One in January over similar allegations, but dropped the lawsuit and others following the start of the Trump administration. James seeks restitution and damages for all affected Capital One customers, disgorgement of profits Capital One made by allegedly illegally misleading its customers, and penalties.
The lawsuit is led by Assistant Attorney General Jason E. Meade with the Consumer Frauds and Protection Bureau.
