District Court Approved Class Action Lawsuit of Billions Against Four Major Banks

The Central District Court in Lod approved conducting a class action lawsuit against four of the country's major banks on the claim that they refrained for years from paying interest on their customers' checking account funds, with the damage to customers estimated at billions of shekels and potentially exceeding 15 billion.

The Central District Court in Lod approved on Tuesday conducting a class action lawsuit against four of the country's major banks, Leumi, Mizrahi Tefahot, Discount and First International Bank, on the claim that they refrained for years from paying interest to customers on their checking account funds, while using the funds to profit. The request was filed in June 2023. According to the report, pursuant to an economic opinion attached to the request, the damage to customers is estimated at 3.62-5.06 billion shekels, and could eventually reach more than 15 billion shekels in light of the extension of the period covered by the lawsuit. Bank Hapoalim is not included in the proceeding, as a separate request against it has not yet been approved.

Justice Samuel Bornstein determined that the profit-making of the four banks constitutes unjust enrichment warranting court intervention, and noted that it is a very large number of customers and enormous sums. The banks argued before him that the account opening contract leaves interest payment to their sole discretion, but the justice rejected the argument. However, he expressed doubt regarding the customers' claims of breach of good faith and breach of trust, and determined that there is no need to decide on them since the matter has already been settled in legislation for the future. Regarding the decision, it was first reported by Marker.

According to the report, the lawsuit addresses the period from April 2022, with the beginning of raising interest rates in the economy, and until May 2025, when an amendment to the Banking Law took effect requiring banks to inform customers with large credit balance about investment options. The affected class includes those who held a credit balance exceeding 3,000 shekels on one business day, or 1,000 shekels on three business days or more in the case of business. According to data presented in the proceeding, about 400 billion shekels of public funds are held in checking accounts, and according to the Bank of Israel, as of April 2024 about 386 billion shekels of them belonged to customers who did not receive interest on them, of which 211 billion shekels belonged to households, as of March last year.

The position of the Bank Supervisor submitted to the proceeding opposed obligating banks to pay interest on checking account balances, citing concern for damage to competition and market mechanisms, and the justice noted that this position has weight but does not deprive customers of the right to sue. At this stage only the conduct of the lawsuit was approved, and no actual compensation was determined. The next hearing in the case is set for February 2027, and it is expected that the banks will request to appeal the decision to the Supreme Court.