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

An Israeli court has authorized a class-action lawsuit against four of the country's largest banks, with plaintiffs seeking up to 15 billion shekels (approximately $4 billion USD) in compensation. The lawsuit alleges that the banks failed to pay adequate interest on positive balances in checking accounts for years, while profiting from these funds. The Central District Court of Israel ruled that the claim of "unjust enrichment" warrants further consideration, though other claims like breach of good faith were not approved at this stage.

The case gained traction following a significant rise in interest rates in Israel after 2022. While deposit rates and mortgage costs increased, the interest paid on standard checking accounts remained extremely low, averaging around 0.1% according to the Bank of Israel. In contrast, short-term deposits offered yields of about 4% in early 2025.

Plaintiffs estimate that Israeli households and small businesses hold approximately 236 billion shekels in checking accounts. They claim that in 2025, banks earned about 430 shekels in interest for every 10,000 shekels held in customer accounts, while customers received only about 10 shekels in interest on the same amount.

The banks being sued are Leumi, Mizrahi-Tefahot, Discount, and First International. Bank Hapoalim is not included in this specific lawsuit, as a separate, similar case is proceeding against it. The current lawsuit was initially filed in June 2023, and the court's decision to proceed with the class-action status comes after more than three years.

The banks maintain that their customer agreements do not obligate them to pay interest on checking account balances, emphasizing that these funds remain fully accessible. The Bank of Israel has also expressed reservations about direct intervention in bank pricing. The 15 billion shekel figure represents the claimed damages, not a guaranteed payout. The final amount, if the plaintiffs prevail, will depend on various factors. The court is considering including customers with balances exceeding 3,000 shekels for at least one business day, or 1,000 shekels for three or more business days. The banks are expected to appeal the decision to the Supreme Court, potentially delaying a final verdict for years.