Capital One Reportedly Settling Savings Account Suit for $425 Million

Capital One will reportedly pay $425 million to settle a lawsuit accusing it of cheating savings account depositors.

That’s according to a report by Reuters on Friday (May 16), citing court documents. The proposed settlement comes amid similar litigation against Capital One by New York State, and as the banking giant finalizes its merger with Discover.

Customers had sued Capital One, accusing the company of falsely promising high interest rates on its 360 Savings accounts while offering much better rates to new customers on its 360 Performance Savings accounts.

According to the settlement, Reuters said, Capital One will pay 360 Savings depositors $300 million to cover interest they could have gotten with 360 Performance Savings accounts. The bank will also pay $125 million in interest to depositors who still have 360 Savings accounts.

The company did not admit to any wrongdoing, Reuters noted. PYMNTS has contacted Capital One for comment but has not yet gotten a reply.

The settlement comes just days after New York Attorney General Letitia James filed a similar suit against Capital One, again alleging that the company misled customers about the existence of its higher interest savings account.

And that suit followed one from January by the Consumer Financial Protection Bureau (CFPB). However, the regulator dropped that case in February as the White House massively scaled back the CFPB’s enforcement efforts.

James’ lawsuit alleges that Capital One marketed the 360 Savings accounts as having “one of the nation’s best savings rates” while keeping the interest rates “artificially low” as rates climbed around the country.

“Capital One assured high returns with no catches, then pulled the rug out from under their customers and hoped nobody would notice,” James said in a news release. “Big banks are not allowed to cheat their customers with false advertising and misleading promises.”

Capital One has said that the company “strongly” disagrees with the attorney general’s allegations and will “vigorously defend” itself in court.

“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,” the company said in an emailed statement to PYMNTS last week.

The suit and the settlement came just days ahead of Capital One’s planned closing of its $35 billion acquisition of Discover, which was expected to become final Sunday (May 18).

Earlier this month, a pair of Democratic lawmakers wrote to the Federal Reserve asking the central bank to rethink its approval of that deal.

“Merchants would have no choice but to accept the terms dictated by Capital One’s network, since they need to access the customers of the largest credit card issuer in the country,” Rep. Maxine Waters of California and Sen. Elizabeth Warren of Massachusetts wrote.