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Capital One (COF) , one of the largest banks in the U.S. with over 100 million customers, recently saw a boost in profits.
The company’s third-quarter earnings report for 2024 revealed that it generated a total net revenue of $10 billion, a 5% increase compared to the same period in 2023.
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Capital One faced increased profits in loan categories such as credit card, auto, consumer banking, etc.
Related: A new federal rule just shrunk a frustrating bank account fee
As Capital One benefits from strong growth, it is now facing a lawsuit from the Consumer Financial Protection Bureau, or CFPB, for allegedly “cheating” customers out of $2 billion.
Capital One accused of illegally misleading customers
In 2013, Capital One introduced its "360 Savings" account, claiming in advertisements that the account had the “best” and “highest” interest rates in the nation.
High interest rates are ideal for savings accounts because the interest is the amount of money a bank pays on a customer's deposit. The higher the interest rate, the faster the money in the savings account grows.
Despite advertising high interest rates for 360 Savings accounts, the CFPB alleges that Capital One “unlawfully misled” customers, claiming that the bank froze its interest rate at a low level during a time when rates rose nationally.
During that same period, in 2019, Capital One also unveiled its “360 Performance Savings” product, which the CFPB alleges is “virtually identical” to 360 Savings.
The only difference between both products is that the bank pays more in interest for the Performance version. At one point, the bank allegedly paid an interest rate for 360 Performance Savings accounts that was 14 times higher than the 360 Savings rate, according to the CFPB.
“From late 2019 to mid-2024, Capital One lowered and then froze the 360 Savings account rate to just 0.30%, even as rates increased nationwide,” said the CFPB in a press release. “In contrast, starting in early 2022, Capital One increased the 360 Performance Savings account rate. In fact, the rate went from 0.40% in April 2022 to 3.30% as of January 2023 and 4.35% as of January 2024.”
How Capital One allegedly hid its new product from 360 Savings customers
The CFPB alleges that Capital One purposely kept customers with 360 Savings accounts “in the dark” about its new 360 Performance Savings product.
The bank allegedly accomplished this by naming and marketing both products similarly and quietly eliminating “nearly all” references to 360 Savings on its website, replacing them with references to 360 Performance Savings.