Diving brief:

• The Consumer Financial Protection Bureau is considering enforcement action against Capital One over online savings accounts that have been the subject of disputes, the bank said in its report Thursday. last quarterly filing with the Securities and Exchange Commission.
• Customers who filed the lawsuit said Capital One led them to believe they were receiving a higher percentage return than they actually were.
• The bank said it received a request for a civil investigation into the matter from the CFPB in August. The bureau informed the McLean, Va.-based lender last month that it was considering enforcement action “on similar grounds” to the claims made in the lawsuit. Capital One is responding to the letter “and it is possible that the CFPB may pursue enforcement action, including possible litigation,” the company said Thursday.

Dive overview:

“This investigation concerns a previously reported class action filed in 2023, for which we have filed a motion to dismiss in court,” a Capital One spokesperson said in an email Friday.

Deposited savings account holders a class action against Capital One in the U.S. District Court for the Eastern District of Virginia in July 2023, accusing the bank of breach of contract, among other things, because the bank began offering a savings account with a higher yield but did not failed to inform its former clients, the plaintiffs said.

The issue involves a savings account offering resulting from Capital One’s acquisition of ING Direct USA in 2012. ING Direct offered a high-yield savings account and, following the acquisition, these account holders are became 360 ​​savings account holders at Capital One.

In 2019, Capital One rolled out a 360 Performance Savings account, offering a higher rate than the 360 ​​Savings account – 1.90%, compared to 1.00% – and stopped offering the old account on the lender’s website, the plaintiffs said.

Customers with the old accounts lost millions of dollars in interest, especially when interest rates began to rise in 2022, because Capital One failed to inform them that the new savings account offered a higher return. high, according to the suit.

“Capital One failed to inform its 360 Savings account holders that the 360 ​​Performance Savings account was available, that 360 Performance Savings was in fact a different account and not simply another name for the 360 ​​Performance Account Savings, or that 360 Performance Savings was paying a higher rate of interest than the 360 ​​Savings Account,” the court filing states. “Instead, Capital One left its savings account holders. 360 into low-yielding accounts and hoped they wouldn’t notice.”

Capital One said it noted the annual percentage yield of its old account in its customers’ monthly statements, and its contracts specify that it reserves the right to change interest rates at its discretion, according to a deposit in the name of the company.

“Since the original lawsuit, we have also been sued in six similar putative class actions in federal courts in California, Illinois, Ohio, Virginia, New Jersey and New York,” a said Capital One.

In March, the company sought to consolidate the lawsuits in the Eastern District of Virginia, a ruling that was granted in June. A consolidated complaint was filed by the plaintiffs in July and a trial date was set for July 2025. Capital One filed a motion to dismiss the complaint, the filing states.

The CFPB declined to comment Friday.

Effect on the merger?

Meanwhile, Capital One is awaiting regulatory approvals for its ongoing project. Acquisition of card issuer and network for $35.3 billion. The proposed combination requires approval from the Federal Reserve and the Office of the Comptroller of the Currency; the Justice Department is also assessing the potential effects of the takeover on competition.

Although the CFPB is not one of the federal agencies reviewing the deal, Director Rohit Chopra said claims that the agreement would inject competition in the credit card market dominated by Visa and Mastercard should be assessed “with a lot of skepticism”.

New York Attorney General Letitia James participated in the scrutiny of the deal. last weekasking a judge to issue Capital One a subpoena related to his office’s antitrust investigation into the proposed merger.

Capital one CEO Richard Fairbank said last week the company currently expects a closing in early 2025, a change from its previous expectations that the transaction would close late this year or early next year.

Jaret Seiberg, an analyst at TD Cowen, said he does not expect the CFPB case to affect Capital One’s proposed acquisition of Discover, “since private lawsuits over the account dispute savings were deposited before the announcement of the agreement. He also emphasized that the CFPB does not have a “formal role” in reviewing mergers.

“It is difficult for us to believe that the bank would have entered into a deal that it knew would be controversial if it saw a real threat,” he wrote in a note Thursday. “We would be surprised if this CFPB investigation had anything to do with Capital One’s announcement that the deal would not close this year. Finalizing the deal in December was always going to be a daunting task.