Capital One has reached a $425 million class action settlement to resolve claims that it misled customers about its 360 Performance Savings account. The issue centers on the bank’s failure to inform holders of older 360 Savings accounts about a newer version that offered a much higher interest rate. According to the lawsuit, the 360 Performance Savings account, which provided an annual percentage yield (APY) of 1.90%, was significantly more lucrative than the 1.00% APY offered to customers with legacy accounts. Those who had kept their accounts since Capital One acquired ING Direct USA in 2012 claimed they were at a disadvantage due to this discrepancy.
The controversy has its roots in a change introduced in 2019 when Capital One rolled out the 360 Performance Savings account. It quickly became apparent that those who had held onto their older 360 Savings accounts were earning less interest, with no clear communication from Capital One about the better option available. The plaintiffs argue that they would have switched accounts if they had been informed in time about the higher rate. Despite Capital One not admitting any wrongdoing, the bank has agreed to settle in an effort to put an end to years of legal disputes.
Background on the Dispute
This situation goes back to when Capital One acquired ING Direct in February 2012, a bank that was already known for offering competitive high-yield savings accounts. After the acquisition, Capital One continued to offer these accounts under the 360 Savings brand. Then, in 2019, they introduced the 360 Performance Savings product, with the higher interest rate that many legacy account holders were unaware of. Customers who did find out about the new account were able to open it manually, but many others were left in the dark, missing out on potential earnings.
Legal Allegations
A class action lawsuit was filed on behalf of 360 Savings account holders in 18 states. The plaintiffs claim that Capital One misled customers by failing to inform them about the 360 Performance Savings account. They also accuse the bank of breaching contract terms and engaging in deceptive practices under state consumer protection laws. The plaintiffs argue that they would have moved to the newer product had they known about the better rate, which could have meant thousands of dollars in lost earnings for many of them.
The allegations pointed to several issues:
- The bank didn’t notify customers about the availability of the 360 Performance Savings account.
- There was no easy way to transfer or upgrade existing 360 Savings accounts to the new product.
- Marketing for the new product did not target existing customers, despite them being long-time Capital One users.
- The significant interest rate gap was kept for an extended period without proper disclosure.
The Settlement Offer
The proposed settlement of $425 million is aimed at compensating customers for the interest they lost, as well as rewarding those who continued to maintain their 360 Savings accounts despite the discrepancy. The compensation will be distributed as follows:
| Category | Amount Allocated | Purpose |
|---|---|---|
| Interest Compensation | $300 million | To reimburse eligible customers for the difference in interest that would have been earned had their accounts received a 1.90% APY. |
| Additional Payment to Account Holders | $125 million | To acknowledge the continued loyalty of long-term 360 Savings account holders. |
The payments will vary depending on factors like how long an individual held a 360 Savings account, the average balance over time, and whether the account is still active. All affected customers will be notified about their eligibility and payment amounts through mail and email.
Eligibility and Disbursement
To qualify for a portion of the settlement, customers must meet certain criteria, including having maintained a 360 Savings account during the period when the 360 Performance Savings account was introduced. Eligible customers who did not switch to the newer account during this time will be considered for compensation. Proof of account ownership will be required to verify eligibility.
Payments will be distributed via direct deposit for active accounts, while checks will be issued for closed or inactive accounts. Some digital payment options may also be available for convenience. The full disbursement will depend on court approval, with payouts expected to begin in 2025.
Broader Implications for the Banking Industry
This case sheds light on larger issues of transparency in banking practices. While Capital One maintains that they disclosed the terms of both accounts, the plaintiffs argue that such disclosures were not sufficient. Many customers expect their banks to inform them of better options, especially when those options are offered by the same institution. Failure to do so can lead to legal challenges, as demonstrated in this case.
In the future, financial institutions may be more cautious about how they communicate product changes and improvements, particularly when those changes directly impact existing customers. Clearer disclosures, better notification systems, and easier transitions between products could become the norm as a result of this lawsuit.
What This Means for Consumers
The Capital One settlement, though not an admission of guilt, sends a clear message to banks about the importance of keeping their customers informed. This case is a reminder to consumers to regularly review their financial products and to ask questions when newer, potentially better alternatives are available.
Customers who are eligible for compensation should:
- Watch for official notices from Capital One regarding their eligibility.
- Prepare any necessary documentation to verify account ownership.
- Follow updates on the court-approved settlement website to ensure they meet deadlines for claims.
- Contact the claims administrator if they believe they qualify but have not received any communication.
Ultimately, this settlement represents a significant step toward holding financial institutions accountable for ensuring transparency and fairness in their dealings with consumers. It may also prompt regulatory changes that make it easier for customers to know when they should switch accounts to take advantage of better rates or terms.
