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Bank allegedly cheated depositors out of interest payments

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Capital One did not admit wrongdoing in agreeing to settle

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New York also suing Capital One over savings accounts

By Jonathan Stempel

May 16 (Reuters) - Capital One has agreed to pay

$425 million to settle nationwide litigation accusing it of

cheating savings account depositors out of much higher interest

rates by not telling them they could move their money to

higher-yielding accounts.

A notice describing the preliminary settlement was filed on

Friday evening in U.S. federal court in Alexandria, Virginia.

The accord requires a judge's approval.

Depositors said Capital One falsely promised high interest

rates on its 360 Savings accounts while quietly offering much

better rates to new customers on the similarly named 360

Performance Savings accounts.

The 360 Savings depositors said Capital One froze their

rates at 0.3% while offering rates to 360 Performance Savings

depositors that peaked at 4.35% early last year. The

higher-yielding account now yields 3.6%.

Under the settlement, Capital One will pay 360 Savings

depositors $300 million to cover interest they could have

received on 360 Performance Savings accounts. It also will pay

$125 million of additional interest to depositors who still have

360 Savings accounts.

The settlement covers depositors with 360 Savings accounts

at any time since September 18, 2019. Legal fees will be paid

from the settlement.

Capital One, based in McLean, Virginia, did not admit

wrongdoing in agreeing to settle. It did not immediately respond

to requests for comment outside business hours.

The U.S. Consumer Financial Protection Bureau filed a similar

lawsuit in January before President Donald Trump took office,

but dropped the case in February as the White House ended most

of the agency's enforcement activity.

On Wednesday, New York Attorney General Letitia James sued

Capital One on behalf of 360 Savings depositors in that state.

The bank denied James' claims and said it would defend itself in

court.

Capital One expects to complete its $35.3 billion takeover

of Discover Financial Services ( DFS ) on May 18.

The case is In re Capital One 360 Savings Account Interest

Rate Litigation, U.S. District Court, Eastern District of

Virginia, No. 24-md-03111.