By Jonathan Stempel
NEW YORK, Jan 12 (Reuters) - A federal judge granted preliminary approval on Monday to Capital One's revised $425 million class action settlement with depositors who said they were cheated out of high interest rates, two months after an earlier accord was rejected.
U.S. District Judge David Novak in Alexandria, Virginia, ruled after Capital One agreed to pay higher interest rates going forward to depositors with 360 Savings accounts, a benefit worth about $530 million in addition
to the original $425 million according to the depositors' lawyers.
The settlement would resolve claims that McLean, Virginia-based Capital One froze rates at 0.3% on "high interest" 360 Savings accounts, while quietly offering rates above 4% to new customers on similarly named 360 Performance Savings accounts.
Under the revised accord, Capital One will pay $425 million to 360 Savings depositors, less fees and expenses.
It will also raise the 360 Savings interest rate to match the 360 Performance Savings interest rate, and maintain and service both types of accounts for at least two years.
"This is a great result for the class," Philip Black, a lawyer for the depositors, said in an email. Capital One did not immediately respond to requests for comment.
NEW YORK MAY END ITS OWN LAWSUIT
In rejecting the earlier settlement, Novak said millions of 360 Savings depositors would recoup less than 10% of their damages, and remain stuck in low-yielding accounts causing "the same financial harm that they have already experienced for years."
Eighteen U.S. states including New York opposed the original settlement.
New York Attorney General Letitia James also sued Capital One, but will dismiss her case if the revised settlement wins final court approval and takes effect.
“Capital One customers were counting on growing their savings accounts, but their bank misled them and cheated them," James said in a statement. "Today we are delivering justice for those customers nationwide."
The 360 Performance Savings accounts now yield 3.3%, following recent declines in benchmark short-term interest rates.
Capital One shares fell as much as 8.2% on Monday, after U.S. President Donald Trump called for a one-year, 10% cap on credit card interest rates. The bank bought card issuer Discover Financial Services last May.
(Reporting by Jonathan Stempel in New York; Editing by Nia Williams and Bill Berkrot)
