In a significant development for both consumers and the banking industry, Capital One’s $425 million settlement with depositors has received preliminary approval after a prior rejection. The agreement aims to compensate customers who were disadvantaged by the bank’s low interest rates on its 360 Savings accounts.
The revised deal promises enhanced benefits, addressing earlier concerns about fairness and long-term harm to account holders.
Capital One’s $425 Million Depositor Settlement
| Key Fact | Detail |
|---|---|
| Settlement Amount | $425 million, including both cash and interest rate improvements |
| Revised Terms | Raised interest rates for 360 Savings account holders, matching the rates of new customers |
| Original Rejection Reason | Previous settlement offered inadequate relief, compensating customers less than 10% of damages |
| Preliminary Approval Date | January 12, 2026 |
Background on the Case
In 2025, Capital One was faced with a class-action lawsuit from holders of its 360 Savings accounts. The plaintiffs alleged that the bank had misled customers by advertising the accounts as “high interest,” but then froze the interest rate at a mere 0.3%, far below the rates of its competitors and newly offered accounts.
This discrepancy led to accusations that long-standing customers were unfairly treated. New customers were granted far better rates, as Capital One offered savings accounts with rates above 4% under its 360 Performance Savings line. These practices, the plaintiffs argued, resulted in financial harm to those who had trusted the bank with their savings for years.
The lawsuit gained traction and led to a proposal for a settlement that would compensate those affected, but the terms were initially rejected by the court. The key issue was that the original offer was insufficient to compensate depositors adequately.
Why the Initial Settlement Was Rejected
In September 2025, a federal judge rejected the first settlement proposal, which was also valued at $425 million. The court expressed concern that the settlement did not adequately compensate the affected depositors, particularly those who had held 360 Savings accounts over an extended period.
According to court documents, the original settlement only offered less than 10% of the damages suffered by customers due to the low interest rates. Moreover, the terms of the settlement did not guarantee that these customers would see improved rates on their savings in the future.
The New York Attorney General and other state officials expressed concern about the fairness of the original settlement. A group of 18 state attorneys general argued that the deal unfairly favored Capital One and didn’t do enough to address the ongoing harm that depositors continued to face from low interest rates.
Additionally, the original settlement did not compel Capital One to raise the interest rates for 360 Savings account holders in the future. As a result, customers were at risk of continuing to suffer financially, even after the settlement had been reached.
Key Revisions in the Capital One’s $425 Million Depositor Settlement
The revised settlement, approved in January 2026, addressed many of the concerns that led to the initial rejection. The new deal not only offered the same $425 million in cash but also included significant improvements to the interest rates for affected account holders.
Under the new agreement:
- Interest Rates Raised: Capital One will raise the interest rates on its 360 Savings accounts to match those of its 360 Performance Savings accounts, which are currently offering rates above 4%. This change is expected to benefit depositors for years to come, ensuring that they receive a fairer return on their savings.
- Future Protections: The bank has committed to maintaining the revised rates for a minimum of two years. This guarantee ensures that depositors will benefit from the improved rates, with no further concerns about the disparity in returns between old and new accounts.
These changes have been hailed as a crucial step in making the settlement more equitable for affected consumers. Experts estimate that the future interest rate changes alone represent a $530 million value, providing substantial relief to those who had previously been disadvantaged.
Expert Analysis: Why the Settlement Matters
Legal experts and consumer advocates have hailed the revised settlement as a victory for consumer protection. According to Professor Helen Maxwell, a banking law expert at Harvard Law School, “This settlement serves as an important reminder that banks must be held accountable for their actions when they mislead or disadvantage customers.
It’s crucial that financial institutions maintain transparency and fairness in their practices, especially when it comes to something as essential as savings accounts.”
Professor Maxwell also noted that the improved interest rates demonstrate a positive shift in how banks are being regulated and held to higher standards. “This agreement shows that consumers can influence the outcomes of class-action cases, even against large financial institutions,” she added.
The Role of State Attorneys General
The involvement of state attorneys general was pivotal in pushing for the revised settlement. In 2025, the New York Attorney General filed an objection to the first settlement, arguing that it failed to adequately address the ongoing damage to depositors.
The AG’s office emphasized that the proposed settlement didn’t offer a meaningful long-term solution to the problem. “Capital One’s actions left long-standing customers with significantly lower returns on their savings,” said New York Attorney General Letitia James in a statement.
“This revised settlement better compensates affected customers and guarantees a fairer financial future for them.” James’ office played a key role in ensuring that Capital One agreed to raise the interest rates on these accounts, making the settlement more favorable for consumers.
Preliminary Approval and Next Steps for Capital One’s $425 Million Depositor Settlement
On January 12, 2026, U.S. District Judge David Novak granted preliminary approval to the revised settlement, after determining that the new terms were a substantial improvement over the earlier proposal.
Judge Novak’s decision followed the presentation of a report by the plaintiffs’ legal team, which emphasized that the revised settlement was far more favorable to customers. The settlement’s preliminary approval means that it will now go through a public notification period, where affected depositors will be notified of the terms and their eligibility to claim compensation.
If the settlement is approved in the final fairness hearing, which is scheduled for April 2026, the funds will be distributed to the affected customers.
Reactions and Impact
The revised settlement has been widely welcomed by consumer advocates and legal experts. The New York Attorney General stated that the revised terms “represented a significant victory for the affected depositors” and indicated that the state would now be prepared to drop its own lawsuit against Capital One if the settlement is finalized.
While the settlement offers much-needed compensation to depositors, Capital One’s stock has faced downward pressure following the preliminary approval. Analysts speculate that the decision is due to broader concerns in the banking sector, including the possibility of more regulatory scrutiny on large banks.
Despite this, the settlement marks a turning point for consumers who had previously felt neglected by the banking giant. For many depositors, the increased interest rates and the guarantees of better returns are a clear acknowledgment that their financial harm was taken seriously.
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The $425 million settlement marks a crucial resolution in the ongoing dispute between Capital One and its 360 Savings account holders. With significant improvements in the settlement’s terms, the revised agreement promises to deliver greater compensation and future protections to those affected by the bank’s previous policies.
While the settlement still requires final approval, the changes implemented in January 2026 ensure that Capital One has made meaningful strides toward addressing the concerns of its customers.
The case serves as a reminder of the critical importance of fair banking practices, and the role that legal action and regulatory oversight can play in holding institutions accountable.
FAQs About Capital One’s $425 Million Depositor Settlement
Q: What was the main issue with Capital One’s original settlement?
A: The original settlement did not offer adequate compensation, leaving many depositors with less than 10% of the damages they suffered. It also failed to address the long-term financial harm from low interest rates.
Q: How does the revised settlement benefit affected customers?
A: The revised settlement includes a $425 million payout, along with a commitment to raise interest rates on 360 Savings accounts to match those of new customers, ensuring better returns for depositors moving forward.
Q: What is the next step in the settlement process?
A: The settlement will undergo a final fairness hearing in April 2026, after which affected customers will begin receiving their compensation.
