Capital One agreed to pay $425 million to settle nationwide litigation accusing the bank of cheating savings depositors out of higher interest rates. The bank allegedly failed to advertise higher-yield accounts to existing customers. The preliminary settlement was filed on Friday in the U.S. District Court for the Eastern District of Virginia.
It is pending a judge’s approval. Depositors alleged that Capital One falsely promised higher interest rates on 360 Savings accounts, which had a fixed rate of 0.3 percent. They claimed the bank did not adequately advertise its better rates on 360 Performance Savings accounts.
The higher-yield account had an interest rate that was as high as more than 4 percent, according to the suit. As part of the settlement, $300 million will go to depositors to make up for the interest they would have earned in the higher-yield account. The remainder of the settlement will go to depositors with open 360 Savings accounts as additional interest.
Legal fees will also be paid out of the settlement.
Capital One faces litigation payout
Capital One admitted no wrongdoing as part of the agreement.
Representatives for Capital One and several lawyers for the plaintiffs did not immediately respond to requests for comment on Saturday. The litigation in Virginia was combined from several separate lawsuits across the country. On Wednesday, Letitia James, the New York attorney general, sued Capital One on behalf of depositors in her state for failing to notify 360 Savings account customers, who faced “artificially low” rates, that they could have switched to the account with better interest rates.
“Capital One assured high returns with no catches, then pulled the rug out from under their customers and hoped nobody would notice,” Ms. James said in a news release. “Big banks are not allowed to cheat their customers with false advertising and misleading promises.”
The suit brought by Ms.
James was not subject to the settlement filed on Friday. Capital One said it would defend itself in court and rejected her claims. The Consumer Financial Protection Bureau similarly sued the bank at the close of President Joseph R.
Biden Jr.’s term in January, arguing that Capital One cheated consumers out of more than $2 billion in interest payments.