Israeli Court Approves Major Class Action Lawsuit Against Four Banks

A district court in Israel has approved a class action lawsuit against four of the country's five largest banks: Leumi, Mizrahi Tefahot, Discount, and International. The lawsuit, which seeks over 15 billion shekels (approximately $4 billion USD) in damages, alleges that these banks profited from customer funds held in checking accounts between 2022 and May 2025 without providing adequate interest.

According to the court's decision, there is a reasonable chance the plaintiffs' claims will succeed. The core argument is that the banks used hundreds of billions of shekels in customer deposits as a source of funding for their operations, earning significant returns while paying negligible or zero interest on these balances. This discrepancy became particularly pronounced with the rise in interest rates starting in 2022.

The legal basis for the suit is the principle of "unjust enrichment," where one party benefits at another's expense without fair justification. While the banks argued that account agreements do not explicitly mandate interest payments on checking account balances, the court found this insufficient to justify substantial profits derived from customer funds without compensation.

Bank Hapoalim is not included in this specific lawsuit, partly due to its "offsetting checking account" mechanism. This system accounts for positive and negative balances within a month to potentially reduce customer interest costs on overdrafts, differentiating it from the other banks' practices.

The court's approval means the case can proceed as a class action, not that the banks are obligated to pay the claimed amount yet. The banks are expected to appeal the decision to the Supreme Court. Customers are advised to review their account management and consider moving excess funds from checking accounts to interest-bearing options.