Capital One could soon face enforcement action from the Consumer Financial Protection Bureau (CFPB) over allegations of inadequate disclosure on a high-yield savings account, according to SEC filings.
This situation arose after customers voiced complaints that Capital One’s rollout of a new high-interest “360 Performance Savings” account was unclear, resulting in some customers potentially earning less than they would have with the new account.
Customer Complaints Spark Legal Dispute
In a lawsuit filed last year, some Capital One customers argued that they were not properly informed about the difference between their existing “360 Savings” accounts and the new, higher yield “360 Performance Savings” accounts. Customers claim this lack of clarity led them to miss out on higher interest earnings. Capital One, however, asserts that it posted the relevant information online and retained the contractual right to modify interest rates as needed, according to Reuters.
Earlier this month, the CFPB reportedly sent a letter to Capital One warning of possible enforcement action in relation to the dispute, with the agency considering potential litigation. Capital One responded by filing a motion to dismiss the lawsuit.
Acquisition Plans in the Spotlight
As Capital One navigates these regulatory issues, it is also awaiting approval for its proposed $35.3 billion acquisition of Discover Financial Services. New York Attorney General Letitia James recently announced an investigation into whether the deal could violate state antitrust laws.
To address potential regulatory concerns, Capital One has pledged $265 billion over five years for community investment, philanthropy, and lending initiatives. This commitment could ease scrutiny, but any action from the CFPB could further complicate the regulatory landscape surrounding the acquisition.
Discover Acquisition Terms
Capital One’s acquisition of Discover, announced earlier this year, involves an all-stock transaction valued at $35.3 billion. Under the terms, Discover’s shareholders will receive 1.0192 Capital One shares for each Discover share they hold. Post acquisition, Capital One shareholders are expected to own 60% of the merged company, with Discover shareholders holding the remaining 40%.
