Capital One Bank class action settlement update: Here's how to claim and what you could receive

Thousands of working capital unity customers could presently have money as constituent of a $425 million settlement tied to a class-action lawsuit over lost interest. The settlement, announced in May, still needs final approval from a federal judge in Virginia.

At the center of the case are two savings accounts that Capital One offered—one older, one newer—that paid very different interest rates. Many customers said they had no idea they were missing out on higher returns.

The legal battle began when customers sued Capital One, claiming they weren’t clearly told about the launch of the newer “360 Performance Savings” account, which paid much higher interest than the original “360 Savings” account. Both accounts had similar names, but drastically different rates.

According to the lawsuit, while the newer account's rate climbed to 4.35% at one point, the older account dropped as low as 0.3%. Customers who stayed in the original account say they weren’t warned about the difference—and some didn’t even know the newer account existed.

The Consumer Financial Protection Bureau (CFPB) said in January that the gap may have cost customers more than $2 billion in potential interest over about seven years.

The lawsuit also accuses Capital One of removing mentions of the old account from its website and redirecting customers to the new account page, adding to the confusion. Employees were reportedly told to mention the new product only if customers asked.

About 75% of customers with the older account still haven’t switched over, according to the Virginia court filing.

Capital One has not admitted to any wrongdoing but agreed to settle the case. Legal experts say this may have been the most practical move.

“You're over and done with it,” said Julie A. Hill, dean of the University of Wyoming's College of Law. “You're not spending lots of money on your lawyers. You're not going to a jury that might or might not be sympathetic. I guess they must have thought that seemed like a fair amount of money given what they expected to spend to otherwise defend and end the lawsuit.”

While the CFPB estimated losses around $2 billion, the final settlement is much lower. But that’s not unusual, says Ira M. Steinberg, a partner at Greenberg Glusker.

“Once the parties realistically evaluate the other’s counterarguments, get feedback from a mediator on the strengths and weaknesses of their case, and make the difficult compromises needed to reach a settlement, it is very common for a case to settle for substantially less than the splashy number set forth in the complaint,” said Steinberg.

Also Read: Capital One $425M settlement: Here's everything you need to know

The settlement also arrives just days before Capital One finalized its major merger with Discover.

Anyone who had a 360 Savings account with Capital One at any point between September 18, 2019, and the date the settlement was approved may be eligible for compensation.

Those who qualify should receive a notice by mail or email with instructions on how to file a claim. Affected customers will need to take action to receive payment.

"Usually, the class members will have to opt in and register to claim their share of the proceeds, but they should look for instructions from the claims administrator on how that process will go forward," Steinberg added.

Hill noted that the administrator will likely use Capital One’s customer records to find and contact people, but the system may not be perfect.

"Typically they've made some attempt to identify the universe of impacted people," said Hill. "But you know they're not going to be perfect because maybe someone had an account and they closed their account and they moved and now when they try to send the notice it doesn't go through."

There will likely be a website and a phone number available for anyone who doesn't receive a notice but believes they are eligible.

How the money will be split

$300 million will go to former and current customers to make up for missed interest. The amount each person receives depends on how long they had the account and how much money they kept in it.

$125 million will be paid as extra interest to customers who still have the old 360 Savings account. Going forward, these customers will now earn at least double the national average savings rate. (The average was 0.42% as of May 19.)

Experts warn that most people won’t be fully compensated for the interest they lost. Still, the larger your balance and the longer you have the account, the more you’re likely to receive.

Steinberg said checks or deposits will go out after the claims window closes.

“I would expect it to be several months,” he said.

Even with the Virginia settlement, Capital One still faces another lawsuit filed by New York Attorney General Letitia James in May. That case is ongoing.

“I think they'll still move forward,” Hill said. “I don't think that it's going to preclude New York from making claims under their law. Now, (Capital One) might have some sort of defense that they've already paid for this and it's a nationwide class action, but New York is typically kind of aggressive about these sorts of things, so I expect that suit will continue for a while.”

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