Capital One deliberately trapped loyal customers in deceptively low-yield savings accounts while secretly offering new customers rates 14 times higher, costing New Yorkers millions in lost interest earnings.
Key Takeaways
- New York Attorney General Letitia James has sued Capital One for maintaining a deceptive “two-tier” savings account system that kept long-term customers locked in at 0.30% interest while offering new customers up to 4.35%.
- The bank allegedly instructed employees not to inform existing customers about higher-interest account options unless specifically asked, violating consumer protection laws.
- A $10,000 deposit in Capital One’s original “360 Savings” account would earn only $186 over five years compared to $1,090 in their newer “360 Performance Savings” account.
- The lawsuit, filed in federal court in Manhattan, seeks restitution for affected consumers and civil penalties against the bank.
- Capital One denies the allegations and plans to defend itself while proceeding with its $35.3 billion acquisition of Discover Financial Services.
Bait-and-Switch Banking Scheme Exposed
New York Attorney General Letitia James has filed a bombshell lawsuit against Capital One Financial Corp., accusing the banking giant of orchestrating a deliberate scheme to cheat loyal customers out of millions in interest earnings. The lawsuit, filed in federal court in Manhattan on May 14, details how Capital One allegedly created and maintained a predatory “two-tier” system of savings accounts that specifically targeted and disadvantaged long-standing customers while reserving significantly higher interest rates for new account holders. This case exposes yet another example of corporate greed and deception at the expense of hardworking Americans.
The heart of the complaint centers on Capital One’s original “360 Savings” accounts, which were aggressively marketed to consumers with promises of exceptional interest rates. According to the lawsuit, Capital One’s marketing slogans proclaimed: “Your money will earn much more than what it would in an average savings or money market account…What’s the catch? There is none,” Attorney General Letitia James cited in court documents Stated by, Letita
The Shocking Interest Rate Disparity
The lawsuit reveals a staggering disparity between what Capital One offered different customers. While the bank kept its original “360 Savings” account holders locked in at rates as low as 0.30%, it quietly introduced a new “360 Performance Savings” account with rates soaring up to 4.35%. This meant that customers with the original accounts were earning a mere fraction of what was possible, despite Capital One’s continued promises that these accounts offered “high interest” rates and “one of the nation’s best savings rates” Stated by, Letitia James
The real-world impact of this deception is substantial. The lawsuit highlights that a $10,000 deposit in the original “360 Savings” account would earn only $186 over five years, compared to $1,090 in the newer “360 Performance Savings” account over the same period. This represents a shocking 586% difference in earnings that Capital One deliberately withheld from its existing customers. With $318 billion in consumer banking deposits as of December 2024, the scale of this alleged fraud is massive, potentially affecting millions of Americans who trusted Capital One with their hard-earned money.
A Culture of Concealment
Perhaps most disturbing are allegations that Capital One deliberately instructed its employees to keep existing customers in the dark about the superior account option. “Customers opened and maintained 360 Savings accounts based on Capital One’s promises that they would receive ‘one of the nation’s best savings rates,'” the complaint states.
Bank employees were reportedly instructed not to inform existing “360 Savings” customers about the new high-yield product unless specifically asked about it. This systematic concealment allowed Capital One to profit handsomely by keeping millions of dollars that should have rightfully gone to their customers as interest earnings. The lawsuit further alleges that despite rising national interest rates, Capital One kept the original 360 Savings account rates artificially low, maximizing their profit margins at the expense of unsuspecting customers who believed they were already receiving competitive rates
Capital One’s Defense and Future Implications
Capital One has responded defiantly to the allegations. “We strongly disagree with the attorney general’s claims and will vigorously defend ourselves in court,” Capital One said in a statement, adding that their Performance Savings account “has always been available in just minutes to all new and existing customers without any of the usual industry restrictions.”
The lawsuit comes at a pivotal time for Capital One, which is on the verge of completing a massive $35.3 billion acquisition of Discover Financial Services, scheduled to finalize on May 18. The news has already impacted the bank’s market performance, with shares falling 1.9% following the announcement of the lawsuit. This case also follows the Consumer Financial Protection Bureau dropping a similar federal case against Capital One after leadership changes at the agency – highlighting once again how federal regulatory agencies often fail to protect consumers when corporate interests are at stake Stated by, James Lawsuit
As Attorney General James seeks both financial restitution for affected customers and civil penalties against Capital One, this case serves as yet another reminder of how financial institutions often prioritize profits over honest dealings with their customers. The lawsuit represents an important stand against corporate deception and reinforces the need for constant vigilance against predatory banking practices that disproportionately harm loyal customers.
