In a significant development on Tuesday, the Consumer Financial Protection Bureau announced a lawsuit against Capital One Financial and its subsidiary, Capital One NA, alleging wrongful practices regarding interest rates in one of its prominent savings account offerings. The case centers on the 360 Savings account, which was promoted as providing some of the highest interest rates in the market.
However, the CFPB asserts that Capital One failed to deliver on this promise, effectively freezing the interest rate at a mere 0.3% from late 2019 through mid-2024, despite a nationwide trend of rising rates during that period. As the financial landscape evolved, Capital One rolled out the 360 Performance Savings program in early 2022.
The CFPB claims that this new program offered significantly higher rates, with the interest soaring to 4.35% by January 2024. Yet, the bureau alleges that the bank did not adequately inform existing 360 Savings account holders about this new, more lucrative option. Instead, the bank allegedly obscured the presence of the higher-yielding 360 Performance Savings account by eliminating references to the original 360 Savings product from its website. The CFPB estimates that this lack of transparency cost consumers over $2 billion in lost interest payments, an assertion that highlights the potentially devastating impact such practices can impose on individuals seeking to grow their savings.
"Banks should not be baiting people with promises they can't live up to," remarked CFPB Director Rohit Chopra, expressing concern about the deceptive tactics employed by financial institutions. In response to these allegations, Capital One's shares saw a modest uptick of 2.5% during afternoon trading.
However, the bank did not provide any comment regarding the lawsuit at the time of reporting. The regulatory agency is pursuing civil monetary penalties as a form of redress for the affected consumers, underlining the need for accountability in the financial services industry. Investors and consumers alike are left wondering about the implications of this lawsuit and the regulatory scrutiny that may follow for Capital One and potentially other banks engaging in similar practices..