Settlement Reached in Nationwide Class Action Over Interest Rate Disparities
Capital One Financial Corp. has agreed to pay $425 million to resolve a major class-action lawsuit accusing the bank of misleading depositors by quietly offering higher interest rates on newer savings accounts while keeping long-time customers locked into lower-yielding products. The settlement, which was filed on Friday evening in U.S. federal court in Alexandria, Virginia, awaits judicial approval before becoming final.
Highlights:
Capital One to pay $425 million to settle litigation over low-interest 360 Savings accounts.
Customers allege they were not informed of the better rates available via newer accounts.
The preliminary settlement has been filed and awaits court approval in Virginia.
Claims Center on Disparities Between 360 Savings and 360 Performance Accounts
The litigation centers around Capital One’s marketing and management of its 360 Savings and 360 Performance Savings accounts. Plaintiffs alleged the bank froze interest rates at 0.3% for 360 Savings customers even as it began offering significantly higher rates — up to 4.35% in early 2024 — on its newer 360 Performance Savings accounts, without informing existing depositors they could switch.
The higher-rate account currently yields 3.6%, a stark contrast to the stagnant 0.3% earned by legacy customers. Plaintiffs contended that Capital One’s failure to notify them of the higher-rate alternative deprived them of substantial interest earnings over several years.
Highlights:
360 Savings accounts were fixed at 0.3%, while 360 Performance accounts offered up to 4.35%.
Customers claimed they were unaware of the option to switch to higher-yielding accounts.
The differential in rates led to significant lost interest income for long-term depositors.
Terms of the Settlement and Scope of Compensation
According to court documents, the $425 million settlement breaks down into two main components. Capital One will distribute $300 million to cover the lost interest that depositors could have earned had they switched to the 360 Performance Savings account. An additional $125 million will be paid as interest compensation to those who still hold 360 Savings accounts.
The agreement covers all depositors who held a 360 Savings account at any point since September 18, 2019. Attorney fees and related legal costs will be deducted from the settlement pool. Although the bank has not admitted any wrongdoing, it consented to the financial terms to resolve the litigation and avoid protracted court proceedings.
Highlights:
$300 million will be paid for missed interest earnings; $125 million for current account holders.
All 360 Savings depositors since September 18, 2019, are eligible under the class settlement.
Capital One has denied wrongdoing but agreed to the settlement to resolve the dispute.
Broader Regulatory and Legal Landscape
The case comes amid increasing scrutiny over how banks communicate with depositors about interest rates. Notably, the U.S. Consumer Financial Protection Bureau (CFPB) filed a similar lawsuit against Capital One in January before the Trump administration began dismantling much of the agency’s enforcement activity in February, leading to the case being dropped.
Separately, New York Attorney General Letitia James filed a lawsuit on Wednesday on behalf of Capital One depositors in that state, raising similar claims of deceptive conduct. The bank has denied the allegations and intends to challenge the state suit in court.
Highlights:
CFPB initially filed a similar complaint but dropped it after a shift in federal enforcement policy.
NY Attorney General Letitia James filed a new lawsuit this week against Capital One.
The bank plans to contest the New York action in court.
Capital One’s Strategic Outlook Amid Legal Challenges
Despite these legal headwinds, Capital One is pressing ahead with its strategic initiatives. The bank’s $35.3 billion acquisition of Discover Financial Services is set to close on May 18. That deal is expected to significantly expand Capital One’s credit card and digital banking footprint, positioning it as a stronger competitor in the U.S. financial services sector.
Highlights:
Capital One’s $35.3 billion acquisition of Discover is scheduled to close on May 18.
The litigation does not appear to be affecting the timeline of the Discover deal.
Capital One remains focused on broader strategic growth despite ongoing legal scrutiny.
