Israeli Banks Face $4 Billion Lawsuit Over Low Interest on Checking Accounts

A class-action lawsuit seeking over 15 billion shekels (approximately $4 billion USD) has been approved to proceed against four major Israeli banks: Leumi, Mizrahi Tefahot, Discount, and International. The lawsuit alleges that these banks paid inadequate interest on customer credit balances in checking accounts, especially during a period of rising interest rates.

The legal action covers the period from April 2022, when interest rates began to climb, until May 2025, when a banking law amendment mandated banks inform customers about investment alternatives for funds held in checking accounts. Bank Hapoalim is not included in this specific suit due to a separate ongoing case concerning a similar issue, which involves its "offsetting checking account" mechanism.

The Central District Court in Lod approved the lawsuit on the grounds of unjust enrichment, though other claims such as breach of good faith and misleading practices were dismissed. The court acknowledged that hundreds of billions of shekels are held in checking accounts, earning minimal interest for customers while serving as a funding source for the banks.

According to the lawsuit's data, approximately 400 billion shekels are held in checking accounts nationwide, with households and small businesses accounting for about 236 billion shekels. The average interest paid by banks on these balances is reportedly around 0.1%. The suit estimates that for every 10,000 shekels held in a checking account during 2025, banks earned about 430 shekels, while customers received only around 10 shekels in interest.

The estimated damages were initially calculated between 3.6 and 5 billion shekels by June 2023, escalating to over 15 billion shekels by May 2025. The represented group includes customers who maintained a credit balance exceeding 3,000 shekels on a business day, or over 1,000 shekels for three or more business days, though these thresholds may change. The banks are expected to appeal the court's decision to the Supreme Court. It is important to note that the approval of the class-action status does not confirm the banks' liability but allows the case to proceed to trial.