A U.S. federal judge has granted preliminary approval to Capital One’s revised $425 million class-action settlement with depositors who claimed they were unfairly deprived of high-interest rates. This decision comes two months after an earlier settlement was rejected. Capital One, based in McLean, Virginia, is a financial holding company that provides a variety of financial products and services. It is perhaps best known as a major credit card issuer.
Judge David Novak of the Eastern District of Virginia issued the ruling after Capital One agreed to increase interest rates for depositors with 360 Savings accounts. Lawyers for the depositors estimate this benefit to be worth approximately $530 million, in addition to the initial $425 million settlement fund. The lawsuit alleged that Capital One froze interest rates at 0.3% on its “high interest” 360 Savings accounts, while simultaneously offering rates exceeding 4% to new customers with similarly named 360 Performance Savings accounts.
Under the revised agreement, Capital One will pay $425 million to 360 Savings depositors, after deductions for fees and expenses. Furthermore, the bank will raise the interest rate on the 360 Savings accounts to match the rate offered on the 360 Performance Savings accounts. The company has also committed to maintaining and servicing both account types for a minimum of two years. An attorney representing the depositors, Philip Black, hailed the settlement as a “great result”.
Judge Novak has scheduled a hearing for April 20 to consider final approval of the settlement. Notably, eighteen U.S. states, including New York, had opposed the original settlement. New York Attorney General Letitia James, who had also filed a lawsuit against Capital One, will dismiss her case if the revised settlement receives final court approval and is implemented. 360 Performance Savings accounts currently yield 3.3%, reflecting recent declines in benchmark short-term interest rates. Shares of Capital One experienced a decline on Monday following comments from former U.S. President Donald Trump regarding credit card interest rate caps.
