Says It Shortchanges Its Customers
By Hank Russell
New York Attorney General Letitia James led a bipartisan coalition of 17 other attorneys general in opposing a proposed class action settlement that would shortchange Capital One customers who were cheated out of more than $2 billion in unpaid interest.
Joining James in filing this amicus brief are the attorneys general of Arizona, California, Colorado, Connecticut, Hawaii, Illinois, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, Ohio, Oregon, Rhode Island, and Washington.
As previously published in Long Island Life & Politics, 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.
In an amicus brief filed today, Attorney General James and the coalition argue that the proposed class action settlement in a separate case fails to hold Capital One accountable and would ultimately benefit Capital One at the expense of the customers it deceived and underpaid. Attorney General James and the coalition are urging the court not to approve this unfair settlement.
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. However, while interest rates rose nationwide beginning in 2022, Capital One kept the 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. As Attorney General James’ lawsuit alleges, this allowed Capital One to mislead 360 Savings customers and avoid paying billions of dollars in interest.
James and the coalition assert that the proposed settlement would allow Capital One to continue underpaying and deceiving its 360 Savings customers. Capital One promised 360 Savings customers, “your money will earn much more than what it would in an average savings or money market account,” yet continues to pay them below the national average.
The settlement would not require Capital One to change this scheme of paying 360 Savings customers lower interest than otherwise-identical 360 Performance Savings customers, the scheme that is at the heart of both the class action lawsuit and the Office of the Attorney General’s (OAG) case.
The group of AGs argues that the proposed class action settlement shortchanges 360 Savings customers and fails to impose any requirements that Capital One change its behavior to avoid misleading its customers. The settlement would provide $125 million in additional interest to customers who continue to hold 360 Savings accounts. However, even with these additional interest payments, the 360 Savings interest rate would still be significantly lower than the 360 Performance Savings rate.
In the time it would take Capital One to pay out the $125 million in additional interest, it would have paid over $800 million at the 360 Performance rate. In total, Capital One would keep more than $2 billion in unpaid interest while the average consumer, who lost out on more than $717 in interest payments, would receive less than $54 in direct compensation under the settlement.
Capital One has also argued that the class action settlement should prevent James from securing restitution for Capital One customers through her lawsuit. The coalition urges the court to reject the settlement and any attempt to use a private agreement to stymie OAG’s enforcement action.
“Capital One customers worked hard for their savings, only to be misled and cheated out of billions of dollars in interest payments that their bank had promised them,” James said. “Now, Capital One is pushing a settlement agreement that would let it off the hook for this illegal scheme. I am leading a bipartisan coalition of attorneys general in opposing this unfair settlement so we can truly hold Capital One accountable and get fair restitution for customers who were cheated.”
Long Island Life & Politics reached out to Capital One for comment, but did not hear back as of press time.