Attorneys general argue settlement favors bank over consumers
A coalition of 18 U.S. states is challenging Capital One’s proposed $425 million settlement over allegations the bank misled depositors with so-called “high interest” savings accounts. In a filing made public in federal court, the states urged Judge David Novak to reject the agreement, arguing that it allows Capital One to continue offering subpar rates without meaningful changes to its business practices.
The deal, which received preliminary approval in June, addresses claims that Capital One froze interest rates at 0.3% for its 360 Savings accounts, while quietly offering over 4% to new customers through similar 360 Performance Savings accounts. The bank agreed to pay $300 million in compensation and an additional $125 million for current account holders — all while denying any wrongdoing.
States say the settlement undercompensates depositors
According to New York Attorney General Letitia James and her counterparts, the settlement would compensate affected depositors with an effective rate of just 0.78%, far below the current 3.5% available on new accounts. The states argue that this would save Capital One more than $2.5 billion while leaving depositors with just a fraction of the interest they lost — an average of $54 compared to $717 in missed earnings.
They also criticized the lack of requirements for Capital One to change its behavior, calling the deal a “windfall” for the sixth-largest U.S. commercial bank. The objection seeks to preserve the states’ own ability to pursue litigation, including a pending lawsuit filed by New York specifically on behalf of its residents.
Capital One defends deal, cites litigation risks
In response, Capital One reiterated its denial of any wrongdoing and described the $425 million settlement as “reasonable” given the risks and uncertainties of extended litigation. Lawyers representing the depositors defended the agreement as fair, emphasizing that delays caused by additional legal actions — including New York’s lawsuit — could be detrimental.
They also pointed out that resources have already been made available for consumers, including a toll-free line to assist account holders with switching to higher-interest alternatives.
Federal oversight and broader implications
The dispute highlights ongoing scrutiny over bank practices following the withdrawal of federal enforcement. The U.S. Consumer Financial Protection Bureau had filed a similar suit in January, but later dropped the case after President Trump’s administration scaled back CFPB activities.
A final hearing on the Capital One settlement is set for November 6. The case, officially titled In re Capital One 360 Savings Account Interest Rate Litigation, could have broader implications for how banks market savings products and how settlements are structured in future class actions.
