It has not been a good month to be Capital One Financial (COF). Another lawsuit has emerged from the Consumer Financial Protection Bureau (CFPB), this time over interest rates. But investors are taking it in stride, and sent shares up fractionally in Tuesday afternoon’s trading.
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The previous lawsuit was connected to the Zelle mobile payments system. Now, the CFPB is going back to take on Capital One over savings account interest rates. In this case, the CFPB alleges, Capital one was “misleading customers” about rates, which ultimately cost account holders over $2 billion in lost interest that they should have received, but did not.
The CFPB, noted a report from CNBC, noted that Capital one was deceiving holders of the 360 Savings account by trying to connect it to its 360 Performance Savings account, which offers a higher interest yield. Since Capital One marketed the two products in much the same fashion, some account holders likely thought their 360 Savings was getting the same rate as 360 Performance Savings, which it was not.
Card Shuffle
As for Capital One cardholders, according to a report from CNET, they will be making a move to Discover’s payment network. However, that move may not happen immediately. Rather, the report notes, Capital One is looking to build out the Discover payment network, which is currently smaller than that of its major competitors.
Worse, Discover is not accepted just anywhere, the reports note. There are some countries that will not accept Discover at all, including in Panama and Serbia. Rules can vary from merchant to merchant, but it is better not to take risks therein. That is part of what Capital One wants to change, and improve, in order to make the Discover network more viable overall.
Is Capital One Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on COF stock based on seven Buys and eight Holds assigned in the past three months, as indicated by the graphic below. After a 44.74% rally in its share price over the past year, the average COF price target of $206.79 per share implies 13.52% downside risk.
