Capital One Sued By New York Over Hidden Interest Rate Scheme That Cost Consumers Millions

Shares of Capital One Financial Corp. COF slid on Wednesday as New York Attorney General Letitia James launched a sweeping lawsuit accusing the banking giant of a deceptive, multi-year scheme that denied long-time customers millions in interest by secretly freezing rates on older savings accounts while offering higher yields to new ones.

What Did Capital One Allegedly Do?

According to the complaint filed in the Southern District of New York, Capital One maintained a misleading "two-tier" savings account system that disadvantaged legacy customers.

The bank's original "360 Savings" accounts were marketed as high-interest offerings, with slogans like "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."

Yet, in September 2019, Capital One quietly introduced a nearly identical account called "360 Performance Savings" with dramatically higher rates—1.90% versus 1.00% at launch, and eventually up to 4.35% while 360 Savings customers were stuck at 0.30%.

Massive Gap In Returns Over Time

As a result, customers believed they still held the advertised "high-interest" product, unaware of the performance gap. For instance, $10,000 in a 360 Savings account earned just $186 in five years. In a 360 Performance Savings account, it would have earned $1,090 — a nearly sixfold difference.

What's At Stake For Capital One?

Capital One had $318 billion in consumer banking deposits as of December 2024. Customer trust, a key driver for retail deposits, could be at risk.

While the company has not yet responded publicly, the lawsuit is already moving markets — Capital One's shares fell 1.9% on Wednesday, the day of the announcement.

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