Israeli Banks Face Billions in Lawsuit Over Unpaid Interest on Checking Accounts

Israel's Central District Court has authorized a class-action lawsuit against four of the country's largest banks: Leumi, Mizrahi-Tefahot, Discount, and First International. The suit, which seeks over 15 billion shekels (approximately $4 billion USD) in damages, alleges that these banks have failed to pay customers adequate interest on positive balances held in their checking accounts for years. The court's decision allows the case to proceed as a class action, but it does not yet establish that the banks owe the money.

The core of the plaintiffs' claim centers on the significant increase in interest rates in Israel following 2022. While interest rates on loans and mortgages rose, the interest paid on funds held in standard checking accounts remained very low, averaging around 0.1% according to the Bank of Israel. This contrasts sharply with deposit rates, which were around 4% in early 2025. The plaintiffs argue that banks have profited immensely by utilizing these substantial, low-interest funds, while customers received minimal returns.

Collectively, Israelis hold approximately 400 billion shekels in checking accounts. The lawsuit specifically targets the period from April 2022 to May 2025, when a new law mandated banks to more actively inform customers with large balances about alternative, higher-yield options. The court authorized the lawsuit to proceed primarily on the grounds of "unjust enrichment," rejecting other claims such as breach of duty of good faith.

Bank of Israel data indicates that while customers received about 10 shekels in interest on every 10,000 shekels held in checking accounts in 2025, banks earned approximately 430 shekels on the same amount. The banks contend that checking accounts are designed for liquidity and that customers choose them for accessibility, not high returns, and that no contract obligates them to pay interest on these balances. The Bank of Israel, while not fully supporting the plaintiffs' arguments, has encouraged customers to compare account yields.

If the banks are eventually found liable, they may seek to offset increased interest payments through other fees or loan conditions. The final payout, if any, will depend on complex calculations of balances, duration, and eligibility criteria. The next stage involves a full trial, with the banks expected to appeal the class-action certification to the Supreme Court, a process that could take years.