By: Jerome Brookshire

Capital One is under fire from New York Attorney General Letitia James, who filed a federal lawsuit on Wednesday accusing the banking giant of systematically misleading depositors and depriving them of millions of dollars in earned interest. The suit, filed in the U.S. District Court for the Southern District of New York, alleges that Capital One used deceptive practices to quietly freeze interest rates on its popular “360 Savings” accounts—even as interest rates across the country surged.

According to a report on Wednesday in The New York Post, James’ complaint paints a damning picture of a financial institution that promised its customers “one of the nation’s best savings rates,” only to lock them into a dismal 0.30% rate on their 360 Savings accounts. At the same time, Capital One quietly launched a new account—360 Performance Savings—in September 2019, offering far more generous yields that eventually peaked at 4.35%. However, James says the bank deliberately failed to inform existing customers of the new option and even instructed employees to remain silent unless asked.

“Customers opened and maintained 360 Savings accounts based on Capital One’s promises,” the complaint reads. “Instead, Capital One took advantage of its customers and hoped that they wouldn’t notice.” The New York Post reported that James is seeking restitution for affected customers, along with civil penalties against the bank for alleged violations of New York’s consumer protection laws.

This lawsuit comes just weeks after the Consumer Financial Protection Bureau (CFPB) dropped its own investigation into Capital One under new leadership following President Donald Trump’s return to the White House. That federal retreat, however, has not stopped James from pursuing what she characterizes as a necessary accountability effort. “This lawsuit seeks to ensure that Capital One does not escape accountability,” she declared, as per the report in The New York Post.

The complaint highlighted a troubling trend of financial institutions leveraging customer inertia for profit—knowing that many account holders would not take the initiative to switch products, even if doing so would yield significantly higher returns. By withholding information and providing no alerts about better alternatives, Capital One allegedly ensured it could continue paying customers far less in interest, saving itself a fortune in the process.

Capital One, headquartered in McLean, Virginia, has pushed back hard against the accusations. In a public statement shared by The New York Post, the company stated, “We strongly disagree with the attorney general’s claims and will vigorously defend ourselves in court.” The bank emphasized that the 360 Performance Savings account “has always been available in just minutes to all new and existing customers without any of the usual industry restrictions.” The account’s current rate stands at 3.6%.

Adding further intrigue, The New York Post report noted that this state-led legal action follows a quiet settlement last month in a separate private class-action lawsuit over the same savings accounts. That settlement, finalized in Alexandria, Virginia federal court, has yet to be disclosed publicly—fueling speculation about the financial scope of Capital One’s potential liability.

The timing of James’ lawsuit is also critical. Capital One is poised to complete its high-profile $35.3 billion acquisition of Discover Financial Services on May 18, a move that could significantly expand its footprint in the U.S. financial services sector. Consumer advocates and regulatory watchers, as reported by The New York Post, are now questioning whether unresolved legal issues—like the deceptive savings account practices—could complicate or delay that merger.

As the legal proceedings unfold in case No. 25-04037 (New York v. Capital One NA et al), financial institutions across the country will be watching closely.

Whether Capital One can defend its practices in court remains to be seen. But one thing is clear: the battle over savings account transparency and financial fairness is far from over.