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 potential damages in the case are estimated to be between 3.62 and 5.06 billion shekels, with projections suggesting the total could exceed 15 billion shekels. The lawsuit covers the period from April 2022 until May 2025, when a banking law amendment mandated banks inform customers with large credit balances about investment options. Customers eligible for compensation are those who held current accounts with balances exceeding 3,000 shekels on a business day or 1,000 shekels over three business days for businesses.

Approximately 400 billion shekels in public funds are held in current accounts. According to Bank of Israel data from April 2024, about 386 billion shekels belonged to customers who did not receive interest. The banks argued that account agreements gave them sole discretion over interest payments, but the judge rejected this claim. The Supervisor of Banks had opposed mandating interest payments on current accounts, citing concerns about market mechanisms and competition, but the court acknowledged this stance did not negate customers' right to sue.

Bank Hapoalim is not included in this specific lawsuit, as a separate class-action request against it is still pending approval. The next hearing for this case is scheduled for February 2027. It is widely expected that the banks involved will appeal the decision to the Supreme Court.