Israeli Court Approves Major Class-Action Lawsuit Against Four Large Banks

A district court in Israel has approved a significant class-action lawsuit against four major banks: Leumi, Discount, Mizrahi Tefahot, and International. The lawsuit alleges that these banks failed to pay customers interest on their current account balances since the Bank of Israel began raising interest rates in 2022. The court ruled that the banks' profit from these funds constituted "unjust enrichment."

The lawsuit, initially filed in June 2023, claims that the banks used customer funds held in current accounts to generate profits without compensating account holders. The estimated damages range from NIS 3.62 billion to NIS 5.06 billion, with potential to exceed NIS 15 billion as the claim period extends. The period under review is from April 2022, when interest rates began to rise, until May 2025, when a banking law amendment mandated banks inform customers with large credit balances about investment options.

Judge Shmuel Bornstein stated that the case involves a "very large number of customers" and "enormous sums" held in dormant current accounts. The lawsuit covers customers who held current accounts with the four banks and had a credit balance exceeding NIS 3,000 on a business day, or NIS 1,000 for three or more business days in the case of a business account.

The banks argued that their account agreements gave them sole discretion over paying interest, but the judge rejected this claim. While the Supervisor of Banks opposed mandating interest payments on current accounts due to concerns about market mechanisms, the judge noted this did not negate customers' right to sue. Bank Hapoalim is not included in this specific lawsuit as a separate claim against it is pending approval.

This decision is preliminary, focusing on the approval to proceed with the class-action, not a final ruling on compensation. The banks are expected to appeal the decision to the Supreme Court, with the next hearing scheduled for February 2027.