By Dylan Tokar

Trump administration officials are moving to drop a government watchdog's lawsuit that accused Capital One of misleading customers over the interest rates on their savings accounts.

A notice of voluntary dismissal was filed in federal court in Virginia, where the Consumer Financial Protection Bureau brought its case in January. Mark Paoletta, chief legal officer for the CFPB , also moved to dismiss other enforcement actions, including the agency's lawsuits against real-estate company Rocket Homes and a student-loan servicer based in Pennsylvania.

The future of the CFPB and its pending actions against banks have been in doubt since its acting director instituted a work freeze, laid off employees and closed the headquarters in Washington. Lawyers for the Trump administration this week said Russell Vought, the agency's acting director, was moving to cancel leases for the agency's offices and four regional offices.

President Trump's nominee to lead the CFPB, Jonathan McKernan, maintained Thursday that he would ensure the agency continues to enforce consumer financial-protection laws at a Senate Banking Committee hearing. Democrats questioned his statements in light of the legal dismissals.

"At the moment that we're sitting here talking about you taking on this responsibility, Russell Vought and others are dismissing lawsuits that you just told me you were going to have the opportunity to review," said Sen. Tina Smith (D., Minn.)

"This makes me question who's really going to be in charge of the CFPB," Smith said.

During the Biden administration, former CFPB Director Rohit Chopra pursued an aggressive line of enforcement against financial institutions, as well as new regulations that were challenged by the industry. The standing of some of Biden-era actions depends on whether the agency decides to defend them in court.

The Capital One suit related to changes the bank made during a period of low interest rates.

The bank in 2019 introduced a savings account called 360 Performance Savings, while keeping existing customers in older accounts with a similar name. When the Federal Reserve raised interest rates, Capital One only raised rates on new accounts. The CFPB's lawsuit said Capital One customers thought they were getting the higher rate that was being advertised. It said millions of customers lost out on $2 billion in interest payments.

"We welcome the CFPB's decision to dismiss this action, which we strongly disputed," a Capital One spokesman said.

A spokesman for Rocket Homes called the CFPB's case a "misrepresentation of the facts" in a statement. "We are proud to put this matter behind us, " he said.

Write to Dylan Tokar at dylan.tokar@wsj.com

(END) Dow Jones Newswires

February 27, 2025 12:54 ET (17:54 GMT)

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