Israeli Court Approves Class Action Against Banks Over Unpaid Interest

An Israeli district court has approved a class-action lawsuit against four major Israeli banks: Leumi, Mizrahi Tefahot, Discount, and International Bank. The lawsuit alleges that the banks failed to pay customers interest on their current account balances or to inform them about options for investing these funds in interest-bearing accounts.

The plaintiffs, represented by attorneys Yitzhak Aviram and Shahar Ben Meir, argue that the banks breached their duty of good faith and trust by not providing interest on current account "overdrafts" (yetirot zchut), especially given the significant rise in interest rates since April 2022. A financial opinion attached to the lawsuit estimates the total damages to customers could range from 3.62 to 5.06 billion shekels.

The banks, however, contend that there is no legal basis requiring them to pay interest on current account balances. They assert that their agreements with customers explicitly address this issue and that current accounts are intended for immediate access, not as investment vehicles. The banks also claim they do inform customers about interest-bearing deposit options and sometimes offer interest on current accounts as a discretionary benefit.

The Supervisor of Banks submitted his position, opposing intervention in bank product pricing and stating that mandating interest payments on current accounts would be a flawed move. The court, in approving the class action, found a prima facie cause of action based on unjust enrichment, stating that the banks profit from holding customer funds in current accounts without paying interest on them.