In re Capital One 360 Sav. Account Interest Rate Litig.

• Court: U.S. District Court — Eastern District of Virginia
• Writing for the Court: David J. Novak, United States District Judge
• Citation: In re Capital One 360 Sav. Account Interest Rate Litig., 779 F.Supp.3d 666 (E.D. Va. 2024)
• Docket Number: MDL No. 1:24md3111 (DJN)
• Decision Date: 12 November 2024
• Parties: IN RE: CAPITAL ONE 360 SAVINGS ACCOUNT INTEREST RATE LITIGATION
• topic: Commercial Litigation,Contracts,Banking and Finance Law,Civil Procedure

779 F.Supp.3d 666

IN RE: CAPITAL ONE 360 SAVINGS ACCOUNT INTEREST RATE LITIGATION

MDL No. 1:24md3111 (DJN)

United States District Court, E.D. Virginia, Alexandria Division

Signed November 12, 2024

MEMORANDUM OPINION

David J. Novak, United States District Judge

Plaintiffs, citizens of eighteen different states and 360 Savings accountholders with Capital One between September 2019 and the filing of the Consolidated Amended Complaint, bring this multidistrict class action, on behalf of themselves and all others similarly situated, against Defendants Capital One, N.A. ("CONA") and Capital One Financial Corp. ("COFC") (collectively, "Defendants"). Plaintiffs' Consolidated Amended Complaint, (ECF No. 10 ("CAC")), asserts twenty-three claims, including breach of contract and the implied covenant of good faith and fair dealing, violations of the consumer protection or unfair trade practice statutes of eighteen different states, unjust enrichment and promissory estoppel. Plaintiffs seek to represent a nationwide class "of all persons who have been Capital One 360 Savings accountholders since Capital One created the 360 Performance Savings account," as well as eighteen state subclasses including all such individuals in the states where the named Plaintiffs reside. (CAC ¶ 119.) This matter now comes before the Court on Defendants' Motion to Dismiss the Consolidated Amended Complaint. (ECF No. 29 ("Motion").)

For the reasons set forth below, the Court will GRANT IN PART and DENY IN PART Defendants' Motion to Dismiss (ECF No. 29). This case shall proceed on all Counts, except for Counts XVI, XX, XXII and XXIII.

I. BACKGROUND

This consolidated multidistrict action arises out of Defendants' alleged breach of contract and breach of the covenant of good faith and fair dealing, as well as violations of various state consumer protection and unfair trade practice statutes. Plaintiffs seek to recover lost interest that Defendants' alleged conduct prevented them from earning on their "high interest" 360 Savings accounts.

A. Factual Background

At this stage, the Court must accept as true the facts set forth in the Consolidated Amended Complaint (ECF No. 10). Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Against this backdrop, the Court accepts the following facts as alleged for purposes of resolving the Motion.

The Consolidated Amended Complaint alleges that Defendants, acting in bad faith, cheated Plaintiffs and similarly situated 360 Savings accountholders out of higher interest payments by creating a duplicate savings account, 360 Performance Savings, and concealing from Plaintiffs the fact that their "high interest" 360 Savings accounts were earning much less interest than the 360 Performance Savings accounts. (CAC ¶¶ 1-11.) Defendant CONA, located in McLean, Virginia, is a national bank and wholly owned subsidiary of Defendant COFC. (Id. ¶ 40.) Defendant COFC is a holding company incorporated in Delaware and located in McLean, Virginia. (Id. ¶ 41.) Plaintiffs allege that Defendants CONA and COFC jointly operate Capital One's website, with the site's terms and conditions referring to "Capital One and its affiliates and related entities as 'we,' 'us' and 'our' " and specifically including COFC and CONA in this definition. (Id. ¶ 53.) Plaintiffs further allege that COFC's 2022 Form 10-K filed with the Securities and Exchange Commission ("SEC") states, "We maintain a website at www.capitalone.com," and that its "deposits, which include . . . savings deposits . . . represent our largest source of funding for our assets and operations." (Id. ¶ 53.)

On February 17, 2012, Capital One announced that it purchased ING Direct USA, which at the time offered an online savings account to United States consumers called "ING Direct." (Id. ¶ 54.) On or about February 1, 2013, after the sale was finalized, ING Direct became "Capital One 360" and consumers with ING Direct savings accounts became Capital One "360 Savings" accountholders. (Id. ¶ 54.) Nearly all named Plaintiffs originally opened online savings accounts with ING Direct, which were then converted to Capital One 360 Savings accounts on or about February 1, 2013.¹ (Id. ¶ 55.) Plaintiffs allege that Capital One made several statements at the time of the transition to assure former ING Direct customers that their accounts would continue to feature a competitive, high interest rate. (Id. ¶ 57.) The 360 Savings Account Disclosures ("360 Disclosures"), made on behalf of CONA, state that "interest rates and annual percentage yields are variable and may change at any time at [CONA's] discretion." (Id. ¶¶ 58-59.) The 360 Disclosures also state that 360 Savings accounts "are subject to both federal law and the laws of the state of Virginia." (Id. ¶ 60.) Plaintiffs allege that Capital One advertised 360 Savings accounts as having "high interest" or a "great rate" from at least April 2013 until September 2019. (Id. ¶ 61.) In January 2018, with the federal funds effective rate rising, Capital One increased the rate on the 360 Savings account from 0.75% to 1.00%. (Id. ¶ 62.) Plaintiffs allege that Capital One would never raise the interest rate for 360 Savings accounts again. (Id. ¶ 63.)

On September 16, 2019, Capital One introduced a new online savings account titled "360 Performance Savings." (Id. ¶ 63.) Plaintiffs allege that, while Capital One's website showed the 360 Savings account as an online savings product on September 17, 2019, by the next day, all references to "360 Savings" were replaced with "360 Performance Savings," with no further explanation of the change. (Id. ¶ 63.) Capital One introduced the 360 Performance Savings account with a 1.90% annual percentage yield ("APY"), but kept the 360 Savings account rate at 1.00%. (Id. ¶ 64.) Plaintiffs allege that the 360 Performance Savings account has had a significantly higher interest rate than the 360 Savings account at every point since its creation. (Id. ¶ 64.) Plaintiffs further allege that Capital One concealed that 360 Performance Savings was a different product by not alerting existing 360 Savings accountholders to the new product and by burying all references to 360 Savings on its website. (Id. ¶ 65.) Further, Plaintiffs' monthly 360 Savings statements did not mention the 360 Performance Savings option with its higher APY. (Id. ¶ 65.) Plaintiffs allege that Capital One was financially motivated to withhold this information from 360 Savings accountholders and pay less interest than it did for 360 Performance Savings accounts. (Id. ¶ 66.)

Plaintiffs allege that, rather than adjust the variable interest rate for the 360 Savings accounts in good faith, Capital One dropped the rate for those accounts from 1.00% in October 2019 to 0.30% in December 2020. (Id. ¶ 67.) Plaintiffs claim that the 360 Savings rate has remained frozen at 0.30% since December 2020, despite increases in the federal funds rate. (Id. ¶ 67.) Meanwhile, Capital One has raised rates on 360 Performance Savings accounts in response to market conditions, and, as of August 2023, the rate paid for those accounts had risen to 4.30%. (Id. ¶¶ 68-70.) Plaintiffs allege that, consistent with consumers' reasonable expectations for "high interest" or "high yield" savings accounts, the rates on their accounts previously fluctuated with market conditions, both before Capital One's purchase of ING Direct USA and following their transition to 360 Savings accounts. (Id. ¶ 71.) Further, Plaintiffs allege that the Account Disclosures for the 360 Performance Savings account contain identical language as the 360 Disclosures pertaining to variable interest rates, and therefore there exists no good faith explanation why CONA would use its discretion to offer higher rates for only 360 Performance Savings accountholders. (Id. ¶ 72.)

Plaintiffs allege that, rather than exercising discretion in good faith to raise rates for 360 Savings accountholders, Capital One instead created a new account with a similar name, while concealing from existing 360 Savings customers that it had changed the nature of its product at their expense. (Id. ¶ 73.) Both products were labeled as either "high interest" or "high yield," two terms which Capital One acknowledges on its website as meaning the same thing. (Id. ¶ 74.) Since September 2019, Capital One's website has only mentioned the 360 Performance Savings account, and current accountholders cannot find information in their accounts discussing any differences between the 360 Savings and 360 Performance Savings products. (Id. ¶¶ 75-76.) Plaintiffs allege that although customers exercising reasonable diligence have no reason to review account statements at any given time, even conducting such a review does not provide any information about the two products and their differences. (Id. ¶ 77.) Rather, Plaintiffs experienced confusion when comparing the APY listed on their account statements and the different rate listed for the only savings account marketed on Capital One's website — 360 Performance Savings. (Id. ¶ 77.) Only those 360 Savings customers who contacted Capital One directly discovered that they would need to open a separate 360 Performance Savings account to obtain the higher advertised rate. (Id. ¶ 78.) As a result of this conduct, Plaintiffs lost interest income proportionate to their account balances since September 2019. (Id. ¶ 79.)

Plaintiffs allege that Capital One acted deceptively, dishonestly, unfairly, in breach of its contract with 360 Savings accountholders and in violation of consumer protection statutes and common law by furtively creating the 360 Performance Savings account without raising the 360 Savings rate or informing customers of the change. (Id. ¶ 80.) Plaintiffs state that no one "would choose the 360 Savings account over the 360 Performance Savings account" due to the latter's higher interest rate and their otherwise identical characteristics. (Id. ¶ 81.) Each named Plaintiff had a 360 Savings...