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MAJOR BANK CHARGED WITH CHEATING CUSTOMERS OUT OF $2 BILLION  
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Judd Legum and Noel Sims
January 15, 2025
Popular Information
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_ The bank promised depositors the highest interest rates, but is
charged with failing to let them know how to get them. _

A lawsuit by the Consumer Financial Protection Bureau (CFPB) has
charged Capitol One Bank of cheating its customers out of $2 billion.,
REUTERS/Andrew Kelly

 

An explosive new lawsuit
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by the Consumer Financial Protection Bureau (CFPB) alleges that
Capital One bank cheated its customers out of $2 billion. According to
the lawsuit, Capital One deceived and abused its depositors, baiting
them with promises of high interest rates before switching the terms
and paying little interest. The CFPB claims that Capital One
purposefully hid the truth about these accounts from customers and
concealed the availability of a new product that paid much higher
interest.

In 2012, Capital One acquired ING Direct, an online bank known for its
generous interest rates. The next year, ING Direct savings accounts
were rebranded as 360 Savings. Former ING Direct account holders were
assured that the rebranded account would still be "no-fee, no-minimum
checking and savings accounts—with the great rates that we know are
important to you."

For the next six years, 360 Savings accounts were marketed to the
public as "high interest" online accounts. "Your money will earn much
more than what it would in an average savings or money market
account," Capital One's website promised from May 2013 to at least
March 2016. "What’s the catch? There is none."

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Emails and other marketing materials said 360 Savings accounts had a
“top savings rate,” “one of the nation’s highest savings
rates,” and “one of the nation’s best savings rates.” Capital
One told customers that the 360 Savings rate could vary, but changes
would be based on "[c]urrent market conditions” and “[o]ur
competition.” The lawsuit argues that "[i]t was reasonable for
consumers to interpret those representations to mean that the 360
Savings rate would increase when interest rates rose more generally."

As a result, the bank suggested that customers would not need to
monitor the rate closely, describing it as a “[c]ompetitive rate you
can bank on.” In 2017 and 2018, it assured customers, "[t]here’s
nothing for you to do. Just sit back and enjoy the extra interest.”
The bank also knew through its internal surveys that customers did not
check their interest rates frequently, and half of the bank's
customers did not know the interest rate on their savings accounts.

Until 2019, Capital One handled the 360 Savings accounts largely as
promised. Then, things changed dramatically.

In September 2019, Capital One created a new type of savings account
called "360 Performance Savings." The account was identical to the 360
Savings account in every way but one: 360 Performance Savings accounts
paid much higher interest rates. At launch, 360 Performance Savings
accounts paid a 1.9% annual interest rate. At the time, 360 Savings
accounts paid 1%.

That spread would increase substantially over time. Starting in
December 2020, Capital One froze the rate of the 360 Savings accounts
at 0.3%. By January 2024, the 360 Performance Savings account paid
4.35% annual interest, and the 360 Savings account still paid 0.3%.

So why didn't every 360 Savings account holder convert to a 360
Performance Savings account? They were not told about the new
accounts.

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Capital One "promoted 360 Performance Savings to existing
customers _who did not have_ 360 Savings accounts, including its
credit card customers, checking accountholders, and CD customers." At
the same time, the bank "eliminated nearly all references to 360
Savings from its website and marketing," which may have led 360
Savings account holders to believe that 360 Savings and 360
Performance Savings were the same product. Most damningly, the lawsuit
alleges that Capital One prohibited employees from telling 360 Savings
customers about 360 Performance Savings "outside of very limited
circumstances." The result was that Capital One could use high rates
to attract new customers while existing customers received a pittance.

The CFPB lawsuit alleges that Capital One's scheme violated laws
against abusive practices, deceptive acts, and misleading advertising.
It seeks to recover Capital One's "unjust enrichment," impose civil
penalties and enjoin the company from engaging in similar conduct.

“The CFPB is suing Capital One for cheating families out of billions
of dollars on their savings accounts,” CFPB Director Rohit Chopra
said in a statement. “Banks should not be baiting people with
promises they can’t live up to.”

Capital One denied the CFPB's allegations and suggested the lawsuit
was inappropriate so close to a change in administration. A Capital
One spokesperson said
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company was "deeply disappointed to see the CFPB continue its recent
pattern of filing eleventh-hour lawsuits ahead of a change in
administration" and pledged to "vigorously defend" itself in court.

Banks like Capital One will likely face less scrutiny from the CFPB
during the next Trump administration. It is possible the CFPB will
cease to exist at all.

Several prominent Republicans and incoming Trump administration
members support eliminating the CFPB, or significantly cutting back
its powers.

The CFPB, which was created in the wake of the 2008 financial crisis
and has since won $19.6 billion
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consumer relief, has long been criticized by Republican lawmakers as a
regulatory overreach. During the Biden administration, lawmakers have
targeted Chopra's attempts to crack down on abusive practices by banks
and other financial companies.

Senator Tim Scott (R-SC), the ranking Republican on the Senate
Committee on Banking, Housing, and Urban Affairs, said last month
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Chopra has been pushing a “unilateral partisan agenda” at
“breakneck speed.”

Both Elon Musk and Vivek Ramaswamy, who Trump has appointed to lead
the Department of Government Efficiency (which is not a government
department and can only make recommendations to Trump), have called
for the CFPB to be eliminated.

“Delete CFPB,” Musk posted on X in November. “There are too many
duplicative regulatory agencies.”

Ramaswamy has posted on X several times about the CFPB. The day after
Musk’s post, he said, “consumers are no better off for its
existence. Quite the contrary, actually.”

He also posted in December that the CFPB’s funding structure is
“constitutionally dubious & anti-democratic.” The agency does have
a unique arrangement, getting money directly from the Federal Reserve
instead of through congressional appropriations, but the Supreme Court
ruled in May 2024 that this structure is constitutional
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Representative French Hill (R-AR), chairman of the House Financial
Services Committee, has been highly critical
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the CFPB under Chopra and said that he would like to eliminate
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agency, but acknowledged there might not be enough support.

Recent proposals
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curtail the agency have included tying its funding to congressional
appropriations to make the agency more beholden to lawmakers and
limiting its investigative powers.

_Judd Legum is the founder and author of Popular Information, an
independent newsletter dedicated to accountability journalism. You can
reach him at [email protected]._

_Noel Sims is a reporter at Popular Information. You can email him
at [email protected]_

* big banks
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* consumer fraud
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* CFPB
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