AG Letitia James sues Capital One over bait-and-switch tactics that cost customers millions 

New York Attorney General Letitia James filed a lawsuit against Capital One, accusing the bank of freezing interest rates on savings accounts as national interest rates increased.

The attorney general filed the lawsuit on Wednesday in the U.S. Southern District of New York. It claims that Capital One froze interest rates on its 360 Savings accounts, which were advertised as high interest savings accounts with "one of the nation’s best savings rates."

The lawsuit says Capital One froze interest rates in 2022 at 0.3%, while offering a different savings account known as 360 Performance Savings. The Performance Savings account was created in 2019, with higher interest rates, at one point reaching 4.35%, or 14 times higher than the original 360 Savings account. 

"Instead of encouraging 360 Savings customers to upgrade their existing accounts, Capital One worked to keep them in the dark about the availability of the new product," the attorney general’s office said in a statement.

"New York families work hard to save money for their futures, and they deserve every dollar of interest they are promised," James said in a statement. "Capital One assured high returns with no catches, then pulled the rug out from under their customers and hoped nobody would notice. Big banks are not allowed to cheat their customers with false advertising and misleading promises."

Capital One officials denied the allegations and said the 360 Performance Savings accounts were advertised nationally and available to new and existing customers without restrictions. Capital One lists more than a dozen branches on Long Island. 

"We strongly disagree with the Attorney General’s claims and will vigorously defend ourselves in court," Capital One said in a statement on Wednesday.

James said the bank violated state and federal law by misleading customers and she accused Capital One of concealing the existence of the higher interest account.

"By doing so, Capital One created a secret, two-tier system of savings accounts in which only new accounts received the high interest rates that Capital One advertised," officials said. "New York customers lost out on millions of dollars of interest compared to what they would have received with 360 Performance Savings accounts, while Capital One pocketed the difference."

The lawsuit asks a federal judge to stop Capital One from "engaging in fraudulent and illegal practices" and to provide a list of all New York customers with 360 Savings accounts who may have lost interest by not switching to the higher interest account.

Officials also asked the court to impose monetary damages for customers and fines on Capital One of $5,000 per violation of general business law of deceptive and unlawful practices. 

A hearing in the case has not been set. Capital One had not filed a response to the lawsuit Wednesday. 

Correction: The lawsuit alleges Capital One froze interest rates on its 360 Savings accounts in 2022. An earlier version of this story had an incorrect year.

By John Asbury

john.asbury@newsday.comJohnAsbury

John Asbury is a breaking news and general assignment reporter. He has been with Newsday since 2014 and previously worked at The Press-Enterprise in Riverside, California.