A federal judge in Virginia has preliminarily approved a revised settlement with Capital One over claims that the bank misled customers about interest rates on its 360 Savings accounts, clearing the way for a deal that more than doubles the value of an earlier proposal the court rejected.
U.S. District Judge David J. Novak signed off Monday on the new agreement, under which Capital One will provide $425 million in restitution and align interest rates on its 360 Savings accounts with those offered on its higher-paying 360 Performance Savings accounts. The revised settlement follows sharp criticism of an earlier deal by New York Attorney General Letitia James, several other state attorneys general, and Judge Novak himself.
In a statement, James said 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.”
“Today we are delivering justice for those customers nationwide and ensuring that they will receive the higher interest rates they were originally promised,” she said, adding that she expects the settlement to receive final approval.
Plaintiffs’ counsel Philip M. Black of Wolf Popper LLP said the revised agreement represents a major improvement for customers. He noted that Judge Novak valued the settlement at roughly $1 billion when accounting for both the $425 million restitution fund and the long term benefit of higher interest rates going forward.
Capital One did not immediately respond to a request for comment.
The litigation centers on allegations that Capital One deprived holders of 360 Savings accounts of higher interest by introducing a separate product, the 360 Performance Savings account, which paid a better rate. Customers claim the bank failed to clearly disclose that the newer account offered superior returns, effectively steering existing customers into lower-yielding products.
State attorneys general, including James, also sued Capital One, accusing the bank of using bait and switch tactics by marketing 360 Savings as a flagship high-interest product while quietly offering better rates through a separate account.
An earlier proposed settlement announced in May also totaled $425 million, with $300 million earmarked to compensate customers for lost interest and $125 million directed to current account holders. That deal was rejected in November after Judge Novak concluded it was procedurally sound but substantively inadequate.
At the time, the court found the proposal potentially would have returned less than 10 percent of estimated damages and failed to provide meaningful relief to the majority of customers who still held 360 Savings accounts. State attorneys general also argued that the structure of the deal inflated its apparent value while allowing Capital One to continue paying lower rates.
Under the revised agreement, Capital One will be required to match interest rates between its 360 Savings and 360 Performance Savings accounts, eliminating what James described as a misleading two tier system. Her office estimates the changes will deliver about $530 million in additional future interest to consumers nationwide, including roughly $34 million to New York customers.
James said she will voluntarily dismiss New York’s lawsuit if the settlement receives final court approval and takes effect.
The case is In re: Capital One 360 Savings Account Interest Rate Litigation, case number 1:24 md 03111, in the U.S. District Court for the Eastern District of Virginia.
