Dive Brief:

• The Consumer Financial Protection Bureau sued Capital One on Tuesday, alleging the bank misled consumers about a savings account product and worked to keep them in the dark.
• In doing so, the McLean, Virginia-based bank “cheat[ed] millions of consumers out of more than $2 billion in interest,” the agency said in a release. “Banks should not be baiting people with promises they can’t live up to,” CFPB Director Rohit Chopra said in the release.
• “We are deeply disappointed to see the CFPB continue its recent pattern of filing eleventh hour lawsuits ahead of a change in administration,” a Capital One spokesperson said Tuesday. “We strongly disagree with their claims and will vigorously defend ourselves in court.”

Dive Insight:

Capital One had warned in October that it might face CFPB action related to the savings product in question. Customers have filed a class-action lawsuit against Capital One over the account offering, saying the bank led them to believe they were receiving a higher percentage yield than they actually were.

Capital One received a civil investigative demand on the matter from the CFPB in August, and the bureau notified the lender in October it was considering an enforcement action “on similar grounds” as claims made in the class-action lawsuit. The CFPB’s complaint was filed Tuesday in the U.S. District Court for the Eastern District of Virginia.

At issue is 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. 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. 

At one point, the new account paid more than 14 times the 360 Savings rate, the CFPB said. The 360 Savings account rate dropped to 0.30%, while the 360 Performance Savings account rate went from 0.40% in April 2022 to 4.35% as of January 2024, the bureau said.

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,” costing them more than $2 billion in lost interest payments, the CFPB contended. 

The bank obscured that the new account was a distinct product with a higher rate than the legacy account, and “eliminated nearly all references” to the older product on its website and replaced them with references to the newer product. The bank also “forbade its employees from proactively telling” 360 Savings customers about the newer offering, the CFPB said.

The lawsuit seeks to provide redress for harmed consumers and impose civil money penalties, paid into the CFPB’s victims relief fund.

Capital One’s spokesperson said the bank’s 360 suite of banking products “offer great rates, carry no fees and no minimums, and have always been available in just minutes to all new and existing customers,” the bank spokesperson said in an email. “Our flagship 360 Performance Savings product was marketed widely, including on national television, with the simplest and most transparent terms in the industry.”

The CFPB on Monday took aim at financial companies’ fine print, proposing a rule that would ban contract clauses that “limit fundamental freedoms,” and prohibit firms from unilaterally amending key contract terms in their favor.  

Capital One awaits regulatory approvals of its bid to purchase card network and issuer Discover for $35.3 billion, announced last February. The acquisition needs sign-off from the Federal Reserve and the Office of the Comptroller of the Currency; the Justice Department is also assessing the takeover’s potential effects on competition. 

Last month, in an additional information request related to the proposed purchase, the Federal Reserve asked Capital One to provide information on the status of the savings account products litigation and the size of the bank’s reserves for such matters. Capital One replied, seeking to keep the information it shared confidential.