Dive Brief:

• The Consumer Financial Protection Bureau on Thursday dismissed its lawsuit against Capital One, continuing the about-face the agency has taken since Donald Trump returned to the White House.
• The consumer watchdog had sued the bank in January, in the final days of the Biden administration, accusing Capital One of misleading consumers about a savings account product and working to keep them in the dark. In doing so, the McLean, Virginia-based bank cheated millions of consumers out of more than $2 billion in interest, the CFPB contended.  
• A Capital One spokesperson said Thursday the company “welcome[s] the CFPB’s decision to dismiss this action, which we strongly disputed.”

Dive Insight:

Reports of the bureau’s move to drop the lawsuit came just as Jonathan McKernan, Trump’s nominee to lead the CFPB, was being questioned by members of the Senate Banking Committee during a nomination hearing Thursday. 

Sen. Tina Smith, D-MN, said that appeared to run counter to what McKernan had told her on Wednesday, that he would review the CFPB’s pending litigation if confirmed.

“Who’s going to be in charge here?” Smith asked McKernan. “It’s not clear to me, because at the moment that we’re sitting here talking about you taking on this responsibility, Russell Vought or others are dismissing lawsuits that you just told me you were going to have the opportunity to review.” 

Vought, the director of the Office of Management and Budget, is also the acting director of the CFPB. Thursday’s court filing was signed by Mark Paoletta, chief legal officer for the CFPB and general counsel for the OMB. The CFPB also dropped lawsuits against Rocket Homes, the Pennsylvania Higher Education Assistance Agency, Vanderbilt Mortgage and Finance and Heights Finance Holding Company, NPR reported. 

Given recent turmoil at the CFPB and the White House’s negative commentary around the agency, Democrats told McKernan on Thursday he appears to be taking on an “unenviable” position. 

The committee’s ranking member, Sen. Elizabeth Warren, D-MA, told McKernan the timing of the announcement to drop the Capital One lawsuit seemed “designed to embarrass you and to show exactly who is in charge of this agency right now: Elon Musk and his little band of hackers.”

Late last week, the CFPB dropped its lawsuit against SoLo Funds. Vought, in a Sunday post on social media site X, called the bureau’s action against SoLo “wrong,” and said “more to come but the weaponization of ‘consumer protection’ must end.”

Christi Lawson, an Orlando-based partner at law firm Foley & Lardner, said she expects the CFPB to take “a more deliberate enforcement” approach under Trump, with the bureau focusing on a specific bad act, rather than pursuing efforts aiming to rein in larger players. Lawsuits such as those against Capital One and Rocket Homes – which was also dismissed Thursday – were “seen as overly broad by the industry,” she noted.

At issue in the lawsuit was a savings account offering that stemmed from Capital One’s acquisition of ING Direct USA in 2012. ING Direct offered a high-yield savings account, and following the acquisition, those account holders became 360 Savings account holders at Capital One. 

Although Capital One touted the 360 Savings account as offering one of the nation’s “best” and “highest” interest rates, the bank lowered and froze the interest rate between 2019 and 2024, the CFPB said when it filed the lawsuit. Around the same time, Capital One rolled out an almost identical product, the 360 Performance Savings account, which offered a higher interest rate than the 360 Savings account. 

The bank didn’t notify its 360 Savings account holders about the new offering, “and instead worked to keep them in the dark about these better-paying accounts,” the CFPB had contended. 

The account offering is also the subject of a class-action lawsuit filed against Capital One, with customers saying the bank led them to believe they were receiving a higher percentage yield than they actually were.