By Jonathan Stempel
(Reuters) -Capital One has agreed to pay $425 million to settle nationwide litigation accusing it of cheating savings account depositors out of much higher interest rates by not telling them they could move their money to higher-yielding accounts.
A notice describing the preliminary settlement was filed on Friday evening in U.S. federal court in Alexandria, Virginia. The accord requires a judge’s approval.
Depositors said Capital One falsely promised high interest rates on its 360 Savings accounts while quietly offering much better rates to new customers on the similarly named 360 Performance Savings accounts.
The 360 Savings depositors said Capital One froze their rates at 0.3% while offering rates to 360 Performance Savings depositors that peaked at 4.35% early last year. The higher-yielding account now yields 3.6%.
Under the settlement, Capital One will pay 360 Savings depositors $300 million to cover interest they could have received on 360 Performance Savings accounts. It also will pay $125 million of additional interest to depositors who still have 360 Savings accounts.
The settlement covers depositors with 360 Savings accounts at any time since September 18, 2019. Legal fees will be paid from the settlement.
Capital One, based in McLean, Virginia, did not admit wrongdoing in agreeing to settle. It did not immediately respond to requests for comment outside business hours.
The U.S. Consumer Financial Protection Bureau filed a similar lawsuit in January before President Donald Trump took office, but dropped the case in February as the White House ended most of the agency’s enforcement activity.
On Wednesday, New York Attorney General Letitia James sued Capital One on behalf of 360 Savings depositors in that state. The bank denied James’ claims and said it would defend itself in court.
Capital One expects to complete its $35.3 billion takeover of Discover Financial Services on May 18.
The case is In re Capital One 360 Savings Account Interest Rate Litigation, U.S. District Court, Eastern District of Virginia, No. 24-md-03111.
(Reporting by Jonathan Stempel in New York; Additional reporting by Nate Raymond; Editing by Chizu Nomiyama and Will Dunham)
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