Key Points
- The CFPB has filed a lawsuit against Capital One for misleading millions of customers about savings account interest rates, leading to over $2 billion in lost interest.
- Capital One is accused of keeping older accounts at lower rates while funneling new customers into higher-yield accounts with similar terms.
- The lawsuit seeks to stop these practices, provide redress to affected customers, and impose penalties.
The Consumer Financial Protection Bureau (CFPB) has filed a lawsuit against Capital One, accusing the bank of deceptive practices that cost consumers over $2 billion in lost interest.
At the center of the lawsuit are allegations that the bank misled customers about the interest rates on its 360 Savings accounts while steering new customers into a nearly identical account with significantly higher yields.
Capital One has consistently been on our list of the best high yield savings accounts, but the current account is different than accounts from years back - with slightly different names.
This practice has been done by other banks previously, but this appears to be the first enforcement action of it's kind.
Misleading Marketing Claims
Capital One marketed its 360 Savings account as a high-interest option with competitive rates. However, from late 2019 to mid-2024, the interest rate for 360 Savings accounts was frozen at 0.30%, even as market interest rates surged. Meanwhile, the bank introduced a new product, the 360 Performance Savings account, which offered rates over 14 times higher than the 360 Savings account at its peak.
According to the CFPB, Capital One failed to notify existing 360 Savings account holders about the new product.
The lawsuit alleges that the bank deliberately obscured the existence of the 360 Performance Savings account from existing customers by eliminating references to 360 Savings in marketing materials and instructing employees not to proactively inform customers about the higher-yielding option.
Two-Tier System
Capital One’s alleged actions highlight a common banking practice: closing one account type to new customers while introducing a similar product with better terms. This strategy allows banks to maintain a lower-cost customer base in older accounts while offering more competitive rates to attract new deposits.
Remember, for banks, savings accounts are liabilities - they cost the company money in terms of the interest paid. If they can pay less interest, they save money.
In this case, the CFPB alleges that Capital One intentionally kept existing 360 Savings account holders in the dark about the higher-yielding 360 Performance Savings account. The bank also excluded 360 Savings customers from marketing campaigns promoting the newer product.
Regulatory Action
The CFPB is seeking to stop the alleged deceptive practices, provide redress to affected customers, and impose civil penalties. “Banks should not be baiting people with promises they can’t live up to,” said CFPB Director Rohit Chopra, in a press release.
The lawsuit, filed under the Consumer Financial Protection Act, also claims that Capital One violated the Truth in Savings Act by misrepresenting the nature of its 360 Savings account.
This case highlights the importance of transparency in financial products and the ongoing regulatory scrutiny of banking practices. Customers are encouraged to regularly review account terms and monitor interest rates to ensure they are receiving competitive returns on their savings.
Furthermore, this case also is likely to put other banks on notice that this type of activity is frowned upon.
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Editor: Colin Graves
Robert Farrington is the founder of The College Investor and is widely recognized as one of the nation’s leading voices on student loan debt and saving for college. He holds an MBA from UC San Diego Rady School of Management and has spent over 15 years researching, writing, and advising on student loans, 529 plans, financial aid programs, and saving and investing for young professionals.
Robert has been featured in the The New York Times, The Wall Street Journal, The Washington Post, NBC News, and Forbes, where he has been a regular personal finance contributor for over a decade. His work combines both professional expertise and personal experience – he successfully navigated his own student loan repayment journey and has helped thousands of readers do the same.
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