Attorney General James praises new Capital One settlement delivering hundreds of millions in restitution to misled savings customers

New York – New York Attorney General Letitia James on Tuesday welcomed a sweeping new settlement with Capital One that will deliver hundreds of millions of dollars in restitution and higher interest payments to customers who were misled about the true value of their savings accounts for years. The agreement, which still requires final court approval, marks a major reversal from an earlier proposal that state officials argued failed to adequately compensate consumers.

Under the terms of the newly announced settlement, Capital One will provide $425 million in restitution to holders of its 360 Savings accounts and commit to paying higher interest rates going forward. The deal follows a lawsuit filed by Attorney General James in May, accusing the bank of deceptive practices that kept customers locked into low-interest accounts while more lucrative options were quietly offered to others.

Attorney General James praised the outcome as a meaningful victory for consumers who trusted Capital One with their savings, only to see their money grow far more slowly than they had been led to expect.

“Capital One customers were counting on growing their savings accounts, but their bank misled them and cheated them out of valuable interest payments for years,” said Attorney General James. “Today we are delivering justice for those customers nationwide and ensuring that they will receive the higher interest rates they were originally promised. I look forward to seeing this settlement approved and will always fight to ensure New Yorkers are treated fairly by their banks.”

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The settlement resolves allegations that Capital One created and maintained a confusing, two-tiered system that benefited the bank at the expense of long-time customers. Capital One heavily promoted its 360 Savings accounts as “high interest” products, advertising them as offering “one of the nation’s best savings rates” and suggesting customers would earn significantly more than they would with traditional savings accounts.

However, according to the Attorney General’s office, those promises did not hold up once interest rates began rising across the country in 2022. While many banks increased savings rates in response to broader economic changes, Capital One kept rates for its existing 360 Savings accounts artificially low.

At the same time, the bank introduced a new product called “360 Performance Savings,” which was nearly identical in structure but offered far higher interest rates. At one point, the interest rate on the newer account was more than 14 times higher than that of the original 360 Savings account. Customers already holding 360 Savings accounts were not automatically upgraded or clearly informed that their money could earn significantly more elsewhere within the same bank.

Attorney General James’ lawsuit alleged that this strategy allowed Capital One to avoid paying customers the higher interest rates they reasonably expected based on the bank’s marketing. The complaint argued that customers were misled into believing their accounts would keep pace with national trends, when in reality, they were left behind unless they proactively opened a new account.

The legal battle intensified earlier this fall, when a proposed class action settlement tied to similar claims came before the court. That initial deal would have provided less than $300 million in restitution and would not have required Capital One to correct its interest rate structure. Attorney General James led a bipartisan coalition of attorneys general in opposing the proposal, filing an amicus brief that argued the settlement shortchanged consumers and allowed the bank’s practices to continue.

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Following those objections, the court rejected the proposed settlement, clearing the way for renewed negotiations. The new agreement announced this week more than doubles the value of the earlier deal and includes structural changes aimed at preventing similar conduct in the future.

Under the revised settlement, Capital One will pay $425 million in restitution to affected customers nationwide. An estimated $34 million of that total will go to New Yorkers who held 360 Savings accounts. In addition to the direct payments, the settlement requires Capital One to align interest rates between its 360 Savings and 360 Performance Savings accounts.
By eliminating the rate gap, the agreement dismantles the two-tiered system that was central to the Attorney General’s lawsuit. State officials estimate that matching the interest rates will provide consumers nationwide with approximately $530 million in additional interest payments over time.

The settlement received preliminary approval from the court on Tuesday. If it receives final approval and goes into effect, the Office of the Attorney General has agreed to voluntarily dismiss its lawsuit against Capital One.

Consumer advocates say the case highlights how subtle changes in account structures and marketing language can have real financial consequences, especially during periods of rising interest rates. For many customers, savings accounts are meant to be low-risk tools for building financial security, not products that require constant monitoring to avoid falling behind.

The Attorney General’s office emphasized that the outcome sends a broader message to financial institutions about transparency and accountability. Banks, officials said, have a responsibility to clearly communicate material changes and not rely on customer inertia to boost profits.

The case was handled by Assistant Attorneys General Adam J. Riff, Chisolm Allenlundy, and Nora Van Horn, along with former Assistant Attorney General Jason E. Meade, all members of the Consumer Frauds and Protection Bureau. The bureau is led by Chief Jane M. Azia and Deputy Chief Laura J. Levine and operates within the Division of Economic Justice, overseen by Chief Deputy Attorney General Chris D’Angelo and First Deputy Attorney General Jennifer Levy.

For Capital One customers affected by the settlement, the agreement could mean long-overdue compensation and a meaningful boost to their savings moving forward. For regulators, the case stands as a reminder that aggressive enforcement can reshape outcomes, even after an initial settlement appears close to final.

Attorney General James said she will continue to scrutinize financial institutions to ensure they honor their commitments and treat customers fairly, particularly at a time when many households are closely watching every dollar they save.

If approved, the settlement will rank among the largest consumer restitution agreements tied to savings account practices, closing a chapter on a dispute that raised fundamental questions about trust, transparency, and fairness in everyday banking.