Dan Ennis
4 min read
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Capital One completed its acquisition of Discover on Sunday, to close the richest banking deal of the past six years and create the nation’s largest credit card issuer.
The bank, over the weekend, also made headway in one of the major court cases against it – a class-action lawsuit brought in the U.S. District Court for the Eastern District of Virginia by customers who held Capital One 360 Savings accounts.
Capital One agreed Friday to pay $425 million in restitution to people who held the savings accounts at any point from Sept. 18, 2019, onward.
That’s the date on which Capital One launched its 360 Performance Savings product. But plaintiffs argue the bank concealed certain details from 360 Savings account holders to avoid paying existing customers the new product’s higher interest rate.
The disparity in returns between the two account products grew in earnest in 2022, when the Federal Reserve began to raise interest rates. Capital One froze its 360 Savings rate at 0.3% at that time, but increased its 360 Performance Savings rate to as high as 4.35%, plaintiffs have noted.
That has spurred legal action from regulators, too.
New York Attorney General Letitia James sued Capital One last Wednesday over the same savings accounts. That lawsuit, in turn, continued a push the Biden-era Consumer Financial Protection Bureau first made in January, alleging Capital One “cheat[ed] millions of consumers out of more than $2 billion in interest.” The CFPB, under a newly reelected Donald Trump, dismissed the lawsuit in February.
As part of Friday’s agreement, Capital One will pay $300 million to class members – prorated based on the amount of interest they would have earned if their 360 Savings account had paid the same interest rate as 360 Performance Savings accounts.
The remaining $125 million will represent additional interest payments to the roughly 75% of class members who continue to hold the legacy savings account product. For that part of the settlement, Capital One must maintain an interest rate on its 360 Savings accounts that is double the Federal Deposit Insurance Corp.’s calculation of the national average for savings deposit accounts.
A judge must sign off on the agreement for it to take effect. The formal settlement agreement will be filed by June 6, along with plaintiffs’ motion seeking preliminary approval. The Virginia case had been set to go to trial July 21. In the agreement, Capital One admitted no wrongdoing.
