Capital One $425 million bait-and-switch settlement: eligibiity and explanation for former and existing customers

Did you have a savings account with Capital One in recent years? If you do, you could be owed a portion of a $425 million settlement. Here’s what’s going on, what it means for you, and how to make sure you don’t miss out.

What’s this settlement about?

Capital One has agreed to pay $425 million to settle a class action lawsuit filed by customers who allege they were misled about interest rates. The settlement needs to be ultimately approved by a federal judge before payments can be distributed.

The lawsuit claims that Capital One tricked customers by marketing its “360 Savings” account as a high-interest offering. Then, in 2019, it launched an account with a very similar name—”360 Performance Savings”—that paid a much higher rate of interest. New customers were encouraged to open the new account, but existing holders of the 360 Savings account were quietly left to earn much less interest.

What did Capital One do exactly?

The lawsuit claims:

• Capital One grandfathered in the ancient 360 Savings account rate at only 0.3%, even as interest rates rose.
• The new 360 Performance Savings account reached as high as 4.3% after the Federal Reserve began hiking rates.
• Capital One did not update current accounts or notify customers that a higher-yielding option was available.

Employees were allegedly instructed not to mention the better account to customers who held the old account.

The bank also excluded those older customers from marketing materials promoting the new account.

In short, the suit claims Capital One denied customers billions in interest by keeping them in the dark.

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Who’s eligible for a payout?

You qualify for a piece of the settlement if:

• You had a Capital One 360 Savings account at any point from September 18, 2019, until the date the judge approves the settlement (which will likely occur in 2025).
• It doesn’t matter if you still bank with Capital One or not—previous customers are also included.

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How Will the $425 Million Be Paid Out?

The money will be split into two parts: 300 million will go directly to eligible customers, based on how long they had the older 360 Savings account and how much more interest they would have earned if they’d been in the higher-rate 360 

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Performance Savings account.

$125 million will go to current 360 Savings account holders by raising their interest rate to at least two times the national average, as calculated by the FDIC.

How to keep your savings working for you

This illustration is a reminder to check every now and then where your money is parked. Here are some simple ways to remain ahead:

• Compare rates: Compare savings account rates every few months. Online banks have higher APYs than traditional banks.
• Put CDs to work for fixed returns: If you’re willing to wait for your funds, a certificate of deposit (CD) yields a fixed rate for a given period.
• Watch out for fees: An account with fewer fees and a lower rate could save you more in the long run than one with a higher APY and plenty of hidden fees.

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If you think you might qualify, look for official notices and instructions on how to get your payment once the settlement is finalized.