Capital One has secured preliminary approval for a revised settlement amounting to $425 million in a class action lawsuit that accused the bank of misleading depositors regarding interest rates on its savings accounts. This settlement comes after a federal judge rejected an earlier proposal, emphasizing the need for a more substantial compensation for affected customers.
The bank’s new strategy includes offering higher interest rates for depositors with 360 Savings accounts, which is expected to provide an additional $530 million to these customers. This modification received the judge’s approval following concerns raised about the adequacy of the initial settlement.
In the class action lawsuit, claimants alleged that Capital One falsely advertised high interest rates on its 360 Savings accounts while providing more lucrative rates to new customers through its 360 Performance Savings accounts. An earlier agreement to settle the lawsuit without any admission of wrongdoing included $300 million intended to cover the interest that 360 Savings depositors may have missed and $125 million in interest for current account holders.
In September, a coalition of 18 state attorneys general, led by New York Attorney General Letitia James, submitted an amicus brief urging the court to reject the initial settlement. They argued it would inadequately compensate Capital One customers. In November 2023, the federal judge sided with the attorneys general, stating that the proposed payout was insufficient and that the plaintiffs’ claims merited “significantly greater relief.” He noted that the settlement would provide less than 10% of the damages owed to the 360 Savings depositors, who were earning significantly less compared to their counterparts with 360 Performance Savings accounts.
In light of these developments, the judge instructed both parties to revisit negotiations to address his concerns regarding the settlement’s fairness. Following the approval of the revised settlement, Attorney General James expressed her support, stating that it ensures Capital One customers will receive the higher interest rates they were initially promised.
The ongoing legal proceedings emphasize the importance of transparency in banking practices and the commitment of regulatory authorities to protect consumer rights. As this case progresses, the impact on both Capital One and its customers will be closely observed.
