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

The Consumer Financial Protection Bureau is considering enforcement action against Capital One Financial over online savings accounts that allegedly duped some consumers into thinking they were getting high rates.

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

Capital One now has an opportunity to respond to the CFPB’s letter, which came about two months after the bureau sent the company a civil inquiry into its online savings accounts.

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

In the 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 made after it acquired ING Direct USA in 2012. ING Direct customers’ high-yield online savings accounts became “360” accounts Savings” in the following year.

As of September 2019, Capital One was paying 1.00% on the “360 Savings” account, according to one of the processes. That same month, the bank reportedly dropped references to “360 Savings” from its website and began advertising a new account called “360 Performance Savings,” which at the time paid a 1 percent annual return, 90%

“Capital One’s conduct caused its 360 savings account holders to lose a total of millions of dollars in interest since September 2019, and especially as interest rates began to rapidly increase in March 2022,” the lawsuit states.

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

“Capital One failed to notify 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 percentage return of its “Savings 360” account was disclosed to its customers in its monthly statements. It also pointed to contractual language that states it has the right to change interest rates at any time at its sole discretion.

In Capital One’s securities filing Thursday, the bank said the seven lawsuits were consolidated in the Eastern District of Virginia and that one trial was scheduled for July 2024.

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

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

Capital One CEO Richard Fairbank acknowledged last week that the Discover business it will not close at the end of 2024which the bank had previously said was a possibility.