A bipartisan coalition of 18 U.S. states is calling on a federal judge to reject Capital One’s $425 million settlement with depositors who claimed they were cheated out of higher interest rates, arguing that the agreement lets the bank continue practices that shortchange customers. The objection was filed Wednesday in federal court in Alexandria, Virginia, where U.S. District Judge David Novak granted preliminary approval of the settlement in June.
Led by New York Attorney General Letitia James, the states contend that the settlement does not adequately compensate depositors or prevent Capital One from repeating its alleged misconduct. Capital One and counsel for the depositors had no immediate comment. Under the settlement, the bank did not admit to any wrongdoing.
The dispute centers on Capital One’s 360 Savings accounts. Plaintiffs alleged that while the bank froze rates at 0.3% for existing 360 Savings account holders, it quietly offered rates above 4% on a separate but similarly named 360 Performance Savings account to attract new customers. The May 16 settlement proposed paying $300 million to 360 Savings depositors to cover lost interest, with an additional $125 million available to those who still hold their accounts.
However, the states argued that under the settlement, depositors would earn just 0.78% interest, far below the 3.5% currently offered to new 360 Performance Savings account holders. They calculated that the bank would save more than $2.5 billion under the agreement, while the average depositor would recover only $54 of the $717 in lost interest — a fraction of what they had been promised.
The states also criticized the settlement for allowing Capital One to continue its existing practices without meaningful reform. They urged Judge Novak to reject the bank’s claim that the agreement preempts Attorney General James’ ongoing lawsuit on behalf of New York depositors, arguing that the settlement should not block state-level enforcement.
The proposed settlement applies to all 360 Savings account holders dating back to September 18, 2019. A hearing to consider final approval is scheduled for November 6. In addition to New York, states raising objections include Arizona, California, Colorado, Connecticut, Hawaii, Illinois, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, Ohio, Oregon, Rhode Island, and Washington.
The dispute echoes a broader regulatory focus on consumer protection. In January, the U.S. Consumer Financial Protection Bureau filed a separate lawsuit against Capital One over similar allegations, but the case was dropped in February after President Donald Trump’s administration scaled back the agency’s enforcement activity.
The case is officially captioned In re Capital One 360 Savings Account Interest Rate Litigation, U.S. District Court, Eastern District of Virginia, No. 24-md-03111.
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