Israeli Court Approves Multi-Billion Shekel Class Action Against Banks Over Interest on Checking Accounts

A district court in Israel has approved a class-action lawsuit against four of the country's five largest banks, alleging they unfairly profited from customer checking account balances without paying adequate interest. The lawsuit, which could amount to over 15 billion shekels (approximately $4 billion USD), targets Bank Leumi, Mizrahi Tefahot, Discount, and International Bank. It claims these banks should have provided customers with interest on their "checking account" (Osh) balances, particularly during periods of rising interest rates.

The court authorized the lawsuit based on the legal principle of unjust enrichment, ruling that the banks' accumulation of profits from these funds, while offering minimal interest to customers, warrants judicial review. The claim covers the period from the start of interest rate hikes in April 2022 until May 2025, when new legislation mandated banks to inform customers about investment alternatives for balances exceeding 15,000 shekels. Other claims, including breach of good faith and misleading practices, were dismissed.

Plaintiffs' lawyers argued that while the total amount in checking accounts is around 400 billion shekels, household and small business balances specifically amount to approximately 236 billion shekels. On these funds, banks paid an average interest rate of about 0.1%, while earning significantly more. For instance, in 2025, for every 10,000 shekels held in checking accounts, customers received about 10 shekels in interest, while banks earned around 430 shekels.

The court's decision was made despite opposition from the Bank of Israel's banking supervision department. The supervisor argued that regulatory intervention in interest pricing could harm market mechanisms and competition. However, the judge stated that while the regulator's policy considerations are important, they do not negate the customers' right to sue for past unjust enrichment. The banks' defense, based on account agreements stating interest payment is at their discretion, was also rejected, as the court found that such clauses do not permit profiting from customer funds without compensation.

A separate class-action request against Bank Hapoalim is proceeding, with an evidence hearing scheduled for January. The banks involved are expected to appeal the decision to the Supreme Court.