By Capital One Financial Corp (NYSE: COF) has been sued by the Consumer Financial Protection Bureau for “cheating” its account holders out of an alarming $2.0 billion.
The bank holding company marketed its “360 Savings” and enhanced “360 Performance Savings” accounts similarly and never notified account holders of the newer option.
This misled them into believing the two products were essentially the same, according to the CFPB. Capital One shares still opened in the green today.
CFPB’s allegations on Capital One
Capital One’s 360 Savings account paid an interest rate of only 0.3% over the past five years.
In comparison, the interest rate with the company’s 360 Performance Savings account was massively raised to 4.35% in January 2024.
Still, Capital One continued to advertise its 360 Savings account as a high-interest offering and forbid its employees from notifying consumers of the significant difference between the interest rate the two products pay, the regulator alleged.
“The CFPB is suing Capital One for cheating families out of billions of dollars on their savings accounts. Banks should not be baiting people with promises they can’t live up to,” Rohit Chopra – the director of CFPB said in a statement on Tuesday.
Capital One stock is currently up some 5.0% versus its year-to-date low.
Capital One denies CFPB’s allegations
Capital One has already dubbed the regulator’s allegations baseless, saying it was absolutely transparent in advertising its upgraded 360 Performance Savings account.
“We’re disappointed to see the CFPB continue its pattern of filing 11th-hour lawsuits ahead of a change in administration. We disagree with their claims and will defend ourselves in court,” the financial services giant added in its release.
The 360 Performance Savings offering was widely marketed in laymen’s terms even on national television, according to Capital One.
Note that Capital One shares currently pay a dividend yield of 1.31% which makes them particularly attractive for those interested in setting up an additional source of passive income.
Capital One stock outlook
Capital One stock has been seeing upward momentum in recent weeks, largely driven by the expectation that the Trump administration will adopt a more accommodative stance on mergers and acquisitions.
Shares of the company have gone up around 13% since the US election results.
The incoming government could, therefore, be a boon for the bank’s pending agreement with Discover Financial.
Still, the risk-reward coupled with COF is more balanced following the recent surge, according to Mihir Bhatia of the Bank of America Securities.
Bhatia downgraded Capital One to “neutral” last month and lowered his price objective to $200.
His new price target still forecasts about a 10% upside from current levels. In 2024, retail behemoth Walmart ended its years-long consumer credit cards partnership with Capital One.
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