Depositors said the bank cheated them out of higher interest rates. As part of the settlement, the bank admitted no wrongdoing and agreed to make up for lost interest earnings.
Capital One agreed to pay a $425 million settlement after it faced nationwide litigation accusing it of cheating savings depositors out of higher interest rates by failing to advertise higher-yield accounts, according to a federal court filing.
The preliminary settlement, which is pending a judge’s approval, was filed in a notice on Friday in the U.S. District Court for the Eastern District of Virginia.
Depositors who sued the bank said that Capital One falsely promised higher interest rates on 360 Savings accounts, which had a fixed rate of 0.3 percent, and did not adequately advertise its better rates on 360 Performance Savings accounts.
The higher-yield account had an interest rate that was as high as more than 4 percent, according to the suit.
As a part of the settlement, $300 million will go to depositors to make up for the interest they would have earned in the higher-yield account.
The remainder of the settlement will go to depositors with open 360 Savings accounts as additional interest. Legal fees will also be paid out of the settlement.
As a part of the agreement, Capital One admitted no wrongdoing.
Representatives for Capital One and several lawyers for the plaintiffs did not immediately respond to requests for comment on Saturday.
The litigation in Virginia was combined from several separate lawsuits across the country.
On Wednesday, Letitia James, the New York attorney general, sued Capital One on behalf of depositors in her state for failing to notify 360 Savings account customers, who faced “artificially low” rates, that they could have switched to the account with better interest rates, according to a news release.
“Capital One assured high returns with no catches, then pulled the rug out from under their customers and hoped nobody would notice,” Ms. James said in the news release. “Big banks are not allowed to cheat their customers with false advertising and misleading promises.”
The suit brought by Ms. James was not subject to the settlement filed on Friday. Capital One said it would defend itself in court and rejected her claims.
The Consumer Financial Protection Bureau similarly sued the bank at the close of President Joseph R. Biden Jr.’s term in January, arguing that Capital One cheated consumers out of more than $2 billion in interest payments. The Trump administration has since dropped that case.