CFPB is considering enforcement action against Capital One regarding online savings accounts

The Consumer Financial Protection Bureau is considering an enforcement action against Capital One Financial in connection with online savings accounts that allegedly misled some consumers into believing they were receiving high interest rates.

The CFPB notified Capital One of the potential enforcement action earlier this month, the McLean, Virginia-based company announced in a securities filing late Thursday.

Capital One now has the opportunity to respond to the CFPB’s letter, which came about two months after the agency sent a civil inquiry to the company in connection with the online savings accounts.

“This investigation relates to a previously reported class action lawsuit filed in 2023 for which we filed a motion to dismiss with the court,” a Capital One spokesperson said in an email.

In its securities filing, Capital One said a total of seven lawsuits have been filed against the bank on behalf of online savings customers.

The lawsuits, which sought class-action status, stemmed from a move Capital One took after it acquired ING Direct USA in 2012. The high-yield online savings accounts of ING Direct customers became ‘360 Savings’ accounts the following year.

As of September 2019, Capital One paid 1.00% on its “360 Savings” account, according one of the lawsuits. The same month, the bank reportedly removed references to “360 Savings” from its website and began advertising a new account called “360 Performance Savings”, which at the time provided an annual return of 1.90%.

“Capital One’s conduct caused 360 Savings Account holders to lose millions of dollars in total interest since September 2019, and especially since interest rates began rising rapidly in March 2022,” the lawsuit said.

In October 2023, Capital One customers with “360 Performance Savings” accounts received 4.30%, while “360 Savings” customers received 0.30%, according to the lawsuit filed in federal court in Virginia.

“Capital One failed to inform its 360 Savings Account holders that the 360 ​​Performance Savings Account was available, that 360 Performance Savings was in fact a different account and not just another name for the 360 ​​Savings Account, or that 360 Performance Savings paid higher interest ,” the plaintiffs’ attorneys wrote.

Last November, Capital One asked a judge to dismiss the Virginia lawsuit. The bank noted that the annual return on its “Savings 360” account was disclosed to its customers in monthly statements. It also pointed to contractual language stating that it had the right to change interest rates at any time and at its discretion.

In Capital One’s securities filing on Thursday, the bank said the seven lawsuits have been consolidated in the Eastern District of Virginia and a trial is scheduled for July 2024.

“We have filed a motion to dismiss the consolidated complaint, which has been fully briefed and is pending in court,” Capital One said in the filing.

The bank’s disclosure of a possible enforcement action comes as Capital One seeks government approval for its proposed acquisition of Discover Financial Services. That $35 billion deal is attracting antitrust scrutiny.

Capital One CEO Richard Fairbank acknowledged last week that the Discover deal has closed will not close until the end of 2024which the bank had previously said was possible.