By Hank Russell
New York Attorney General Letitia James sued Capital One N.A. and Capital One Financial Corporation on May 14 for cheating its online savings account holders in New York out of millions of dollars in interest payments. The lawsuit alleges that Capital One marketed its “360 Savings” accounts as “high interest” accounts with “one of the nation’s best savings rates” that would earn its customers more than an average savings account.
According to the lawsuit, while interest rates rose nationwide, Capital One kept interest rates for its 360 Savings accounts artificially low. Instead, Capital One created “360 Performance Savings,” a nearly identical type of savings account that provided much higher interest rates than 360 Savings — at one point, more than 14 times higher. Capital One intentionally misled its 360 Savings customers about the existence of its 360 Performance Savings product to avoid paying them millions of dollars in interest.
Capital One marketed 360 Savings as its “high interest” savings account product with “a great everyday rate,” promising customers: “Your money will earn much more than what it would in an average savings or money market account…What’s the catch? There is none.”
However, beginning in September 2019, Capital One introduced a new type of savings account called 360 Performance Savings that paid much higher interest rates, the suit alleges. As interest rates rose nationwide beginning in 2022, Capital One froze its 360 Savings rate at 0.3% and increased its 360 Performance Savings rate to as high as 4.35%, leaving 360 Savings customers with a below-average interest rate. Instead of encouraging 360 Savings customers to upgrade their existing accounts, Capital One worked to keep them in the dark about the availability of the new product.
Capital One removed 360 Savings from its website and completely replaced it with 360 Performance Savings, concealing that 360 Savings and 360 Performance Savings existed as separate and distinct products with different interest rates. By doing so, Capital One created a secret, two-tier system of savings accounts in which only new accounts received the high interest rates that Capital One advertised.
With compound interest, even a small difference in rates adds up over time to create large differences in savings, meaning customers who stayed in 360 Savings accounts lost out on significant interest payments. A customer who put $10,000 in a 360 Savings account in September 2019 would have earned $186 of interest after five years. If the same customer had switched to a 360 Performance Savings account, they would have earned $1,090 in interest over the same period. Collectively, New York customers lost out on millions of dollars of interest compared to what they would have received with 360 Performance Savings accounts, while Capital One pocketed the difference, according to the AG.
This is not the first time Capital One has been sued for this alleged practice. The Consumer Financial Protection Bureau sued Capital One in January over similar allegations, but voluntarily dropped its lawsuit, along with a slew of other lawsuits, after a change in leadership.
“New York families work hard to save money for their futures, and they deserve every dollar of interest they are promised,” James said. “Capital One assured high returns with no catches, then pulled the rug out from under their customers and hoped nobody would notice. Big banks are not allowed to cheat their customers with false advertising and misleading promises. I will always fight to protect New Yorkers’ wallets and prevent banks from ripping off consumers to boost their own bottom lines.”
Long Island Life & Politics reached out to Capital One for comment. In a statement, the bank replied, “We strongly disagree with the Attorney General’s claims and will vigorously defend ourselves in court. Capital One is proud of its unique and industry leading 360 suite of banking products, all of which offer great rates, and carry no fees and no minimums. Our flagship 360 Performance Savings product was marketed widely, including on national television, and has always been available in just minutes to all new and existing customers without any of the usual industry restrictions.”