The Consumer Financial Protection Bureau sued Capital One Financial on Tuesday, arguing it cheated some longstanding customers by not offering the high interest rates it offered newer savers.
The lawsuit, which Capital One said it will fight “vigorously,” comes as other federal agencies deliberate on whether to allow Capital One to purchase its competitor Discover Financial. It also comes as the CFPB prepares for what’s likely to be its final days under Director Rohit Chopra, whose agency has issued a flurry of actions recently.
The CFPB lawsuit says Capital One was “cheating families” the last two years by paying savers on a dated product an interest rate of 0.3% — even as it paid 4.35% to others in newer savings accounts. It did so despite telling customers years earlier they would earn some of the “highest” rates available on savings accounts, the agency said.
“Banks should not be baiting people with promises they can’t live up to,” Chopra said in a news release, adding that Capital One’s actions cost consumers $2 billion in lost interest payments.
Capital One quickly pushed back on the lawsuit.
“We are deeply disappointed to see the CFPB continue its recent pattern of filing eleventh hour lawsuits ahead of a change in administration,” the company said in a statement. “We strongly disagree with their claims and will vigorously defend ourselves in court.”
The bank said its higher-paying 360 Performance Savings product was “marketed widely” for new and existing customers to enroll. The bank’s products “have always been available in just minutes to all new and existing customers without any of the usual industry restrictions,” the company said.
Many banks offer high rates to savers with more money to stick at the bank, while paying those with lower balances very little interest. Some such as PNC Financial Services, Citigroup and BMO Financial Group also compete with Capital One in offering high-yield savings accounts — but they
A group of Capital One customers who were paid lower rates
Investors don’t seem worried Chopra’s lawsuit will hurt the chances of approval for Capital One’s $35.3 billion deal for Discover. The bank’s stock price rose more than 1.4% in Tuesday morning trading.
Jaret Seiberg, a policy analyst at TD Cowen, wrote that the lawsuit should have no impact on the deal. The merger is pending approval from the Federal Reserve and Office of the Comptroller of the Currency. Chopra has no formal say in whether to approve the acquisition, Seiberg noted.
The Trump-led CFPB may choose to stick with the lawsuit, but the bank may ultimately choose to settle it rather than fight the agency in court, he added.
“We would give the bank the edge if it is litigated,” Seiberg wrote in a note to clients. But fighting the lawsuit may bring negative headlines, which he wrote “may make a settlement a better option politically.”