Capital One Financial, which announced the closing of its Discover Financial Services acquisition over the weekend, has agreed to pay $425 million to settle a class-action lawsuit involving the rates it paid on certain savings accounts.
The settlement agreement has yet to receive court approval, and Capital One faces
Nonetheless, the agreement with lawyers representing Capital One 360 Savings account holders represents a step toward resolving an issue that hung over the blockbuster Discover deal.
Under the agreement, Capital One pledged to pay $300 million to 360 Savings account holders, based on how much interest they would have earned if they had instead put their money in 360 Performance Savings accounts.
Capital One customers who have continued to maintain their 360 Savings accounts would receive an additional $125 million. To make those payments, Capital One agreed to pay them an interest rate that's at least twice the national average for savings accounts.
The class-action suit, filed in 2023, accused the bank of acting deceptively by creating a new high-yield savings account called 360 Performance Savings rather than raising the rates it paid on 360 Savings accounts.
The settlement agreement comes just days after New York Attorney General Letitia James sued Capital One over the rate paid on 360 Savings accounts.
That suit came on the heels of the Consumer Financial Protection Bureau's decision to
The New York lawsuit is similar to the one dropped by the Trump-era CFPB, according to Moshe Orenbuch, an analyst at TD Securities. "That said, instead of nationwide, this will now only cover NY state," Orenbuch wrote in a research note.
Capital One said Sunday that it has completed its acquisition of Riverwoods, Illinois-based Discover, in a deal valued at $35.3 billion when it was announced in February 2024.
The acquisition makes Capital One the nation's largest credit-card lender. It also gives Capital One the ability to route card payments over Discover's network, which competes with networks operated by Visa and Mastercard. And it makes Capital One the eighth-largest U.S. banking company, up from the 11th-largest previously.
Capital One said Sunday that it plans to offer Discover-branded credit cards alongside Capital One-branded offerings.
Community benefits, cash award
The McLean, Virginia-based company also said it is in the early stages of implementing a five-year
The company reiterated its intention to use the plan to expand affordable housing access; increase access to credit for consumers with low and moderate incomes; expand access to small-business credit; and build local infrastructure. But the bank also said that the plan was designed to meet the needs of communities and could evolve depending on how needs evolve.
On Monday, Capital One disclosed that its chief financial officer, Andrew Young, would receive a special cash award of $500,000 in connection with what the company called his "exceptional contributions" to the Discover deal.
