The news: A court granted preliminary approval for a $425 million settlement of a class action lawsuit against Capital One’s savings account marketing practices.

At issue was a 4% rate paid to new 360 Performance Savings customers versus 0.3% for the similarly named 360 Savings account. Capital One will need to match the interest rates as part of the settlement.

Zoom out: This issue has dragged on for almost two years. A class action filed in February 2024 and a separate Consumer Financial Protection Bureau lawsuit filed last January both allege intentionally deceptive marketing practices. They claim that Capital One shortchanged 360 Savings customers and kept interest artificially low, despite advertising both offerings as high-interest savings programs.

The debacle mirrors a December 2023 class action lawsuit accusing the Axos Bank online subsidiary UFB Direct of advertising high interest rates on new accounts but then quickly capping them post account opening. And some brokerage firms have been accused of keeping customers in unreasonably low-yielding cash sweep accounts without offering alternatives, an alleged lie by omission that caused customers economic harm.

Implications for banks: The Capital One incident highlights what can go wrong when product and marketing teams aren’t aligned. It also reinforces that the risks inherent to marketing financial products and services is only heightened when those in question look similar to one another.

Even if Capital One’s financial penalties are manageable, the bigger damage may be reputational. Perceived unfair treatment undermines customer trust, and once that confidence erodes, retaining customers becomes far more difficult.