Capital One reached a $425 million settlement in order to end a nationwide class-action lawsuit. Capital One allegedly deceived its savings account clients by failing to disclose more profitable interest-bearing options. Late Friday, a notice of preliminary settlement was submitted to the federal court located in Alexandria, Virginia. Before the agreement is finalized, a judge must still approve it.
Capital One pays $425 million in savings account lawsuit
The lawsuit claims that Capital One promoted competitive interest rates for its 360 Savings accounts. However, the bank allegedly persisted in offering new customers 360 Performance Savings accounts with higher yields without informing current customers that they could switch and increase their earnings. Performance Savings accounts offered rates as high as 4.35% in early 2023 and are currently at 3.6%. However, 360 Savings customers had their rates locked at just 0.3%.
Capital One will provide two forms of compensation to impacted customers as part of the proposed agreement. It intends to disburse $300 million to individuals who were not transferred to the performance accounts, thereby losing out on increased returns. Individuals who still have 360 Savings accounts will receive an additional $125 million in interest reimbursement. Anyone who kept a 360 Savings account on or after September 18, 2019, is covered by the settlement. The entire settlement sum will be reduced by legal fees.
Despite accepting the terms, Capital One has not acknowledged any misconduct. The McLean, Virginia-based bank has refrained from making any public remarks regarding the settlement. Letitia James, the attorney general of New York, brought a different lawsuit earlier this year on behalf of citizens of the state who had 360 Savings accounts. Capital One said it would vigorously defend itself and denied the accusations. The agreement was reached as Capital One gets ready to complete its $35.3 billion acquisition of Discover Financial Services, which is scheduled to close on May 18.
Featured Image Credit: Malcolm Garret; Pexels: Thank You!
