The CFPB is considering enforcement action against Capital One for its online savings accounts

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

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

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

“This investigation pertains to a previously reported class action lawsuit filed in 2023, for which we have filed a motion to dismiss,” 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 seeking class-action status stemmed from Capital One’s move after acquiring ING Direct USA in 2012. ING Direct customers’ high-yielding online savings accounts became “360 Savings” accounts the following year.

As of September 2019, Capital One contributed 1.00% to the “360 Savings” account. one of the lawsuits. That same month, the bank allegedly removed references to “360 Savings” from its website and began advertising a new account called “360 Performance Savings,” which at the time was earning an annual rate of return of 1.90%.

“Capital One’s conduct has caused 360 Savings Account holders to collectively lose millions of dollars in interest since September 2019, and especially since interest rates began to rise sharply in March 2022.” – we read in the lawsuit.

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

“Capital One failed to notify holders of its 360 Performance Savings accounts that the 360 ​​Performance Savings account was available, that 360 Performance Savings was in fact another account and not just another name for the 360 ​​Savings account, or that 360 Performance Savings had paid a higher rate percentage,” wrote the plaintiffs’ lawyers.

Last November, Capital One asked the judge to dismiss lawsuit in Virginia. The bank noticed that the annual interest rate on the “Savings 360” account was disclosed to customers in monthly statements. It also pointed to language in the contract stipulating that it has the right to change interest rates at any time at its discretion.

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

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

The bank’s disclosure of possible enforcement actions comes as Capital One seeks government approval for its proposed acquisition of Discover Financial Services. This $35 billion deal is subject to antitrust scrutiny.

Capital One CEO Richard Fairbank confirmed the Discover deal last week will not close at the end of 2024which the bank said was possible before.