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By Suzanne Blake
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Capital One has agreed to pay $425 million to settle a class-action lawsuit over allegations it withheld higher interest rates from certain savings account customers, according to federal court filings reviewed by The New York Times.
The settlement, which awaits a judge's approval in the U.S. District Court for the Eastern District of Virginia, covers nationwide litigation brought by depositors who said they missed out on higher earnings due to the bank's handling of its 360 Savings and 360 Performance Savings accounts.
As outlined in the court documents, Capital One did not admit wrongdoing but agreed to compensate affected customers for foregone interest and provide additional payments to those holding certain accounts.
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Why It Matters
With interest rates rising rapidly since 2022, many consumers have become increasingly sensitive to the rates offered on their deposits.
The case highlights growing public scrutiny of banking practices and transparency around financial products amid heightened regulatory focus. Banks are adapting their offerings after the Federal Reserve's interest rate hikes.
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What To Know
Who Is Eligible for a Payout?
The settlement covers customers who held a Capital One 360 Savings account since September 18, 2019, when the bank launched its 360 Performance Savings product. These individuals are considered 'class members' in the Eastern District of Virginia case.
Specifically, eligibility consists of:
- Anyone who had a 360 Savings account with Capital One from September 18, 2019, through the present, regardless of whether the account is still open or has since been closed.
- The $300 million payout pool will be distributed to all eligible account holders, with individual amounts calculated based on the interest the customer would have earned if their 360 Savings account matched the rates of the 360 Performance Savings accounts during the same period.
- As of the settlement date, an additional $125 million is designated for customers with 360 Savings accounts. These account holders will receive further interest payments. Capital One must maintain an interest rate at least double the national average for savings accounts set by the Federal Deposit Insurance Corporation (FDIC) for this group.
Details on Payout Calculation
Payment amounts will vary for each class member, being prorated by the potential interest they missed. This means that the longer a customer held a 360 Savings account during the eligible dates and the higher their balance, the larger their share of the settlement.
Customers who switched to 360 Performance Savings or closed their accounts remain eligible for a portion of the $300 million reserved for lost interest.
Why Are These Customers Getting Paid?
The lawsuits claimed that Capital One advertised its legacy 360 Savings account as offering competitive interest rates, while failing to inform or encourage existing accountholders to switch to the newer 360 Performance Savings account, which offered substantially higher rates (as much as 4.35% at times compared to 0.3% fixed for 360 Savings).
This rate disparity widened as the Federal Reserve raised interest rates in 2022. Plaintiffs argued that customers were deprived of potential earnings as a result.
Are All Capital One Customers Included?
No. Only those who held a 360 Savings account during or after September 18, 2019, are eligible. The settlement does not automatically include 360 Performance Savings customers or individuals with other account types.
Additionally, the agreement does not cover claims raised by the New York Attorney General's separate lawsuit, which remains ongoing.
Legal Fees and Next Steps
Legal fees for class-action attorneys will be paid from the settlement fund. Judge approval is required before payments begin, with a formal hearing set and preliminary approval to be filed by June 6.
What People Are Saying
Letitia James, New York Attorney General, said in a news release: "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."
Capital One spokesperson said in a company statement: "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."
Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek: "One of the few economic bright spots of rising rates in recent years has been in savers gaining more interest on their accounts. In this situation, though, those with existing accounts noticed their interest rate failed to match the ones being offered to new customers of Performance Savings Account and took legal action. Settlements like this could serve as a warning for financial institutions in the future looking to entice new customers with promotional rates. Neglecting existing customers with existing rates could backfire in a big way."
Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek: "This is exactly why the Consumer Financial Protection Bureau (CFPB) exists – to guard against this kind of behavior. But as we've seen, the more we deregulate, the more common these cases become."
"As for the settlement, it's likely to be a typical 'pay without admitting guilt' deal. The issue here is that customers claim their savings accounts were capped at 0.3 percent interest, while the bank offered similar accounts paying up to 4.35 percent, effectively pocketing the spread. This isn't new – it's a classic case of exploiting the knowledge gap between the institution and its clients."
Drew Powers, the founder of Illinois-based Powers Financial Group, told Newsweek: "As always in these types of cases, once legal fees are paid and other costs are factored in, the average account holder will receive a fraction of the actual amount they were due."
"This is another example of why the individual saver must be diligent in checking and double checking for updates and new programs. These big corporations are not looking out for the little guy, and with Capital One having completed their takeover of Discover Financial Services and becoming even bigger, we should not expect things will change for the better."
What Happens Next
The preliminary settlement requires court approval, with a final hearing expected by mid-June 2025.
After judicial approval, settlement administrators will notify eligible class members regarding payout procedures. The court process will define timelines for when former and current 360 Savings account holders will receive payments from the settlement fund.
"This may be one of the last settlements of its kind if Russell Vought and others succeed in scaling back the CFPB's power," Thompson said. "If that happens, expect even less accountability from financial institutions in the future."
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