Israeli Banks and Insurers Face Class Action Lawsuits Over Email Tracking Pixels

Several major Israeli financial institutions, including Bank Hapoalim, Discount Bank, Menora Mivtachim, and The Phoenix, have reported to investors that they are facing class action lawsuits. Discount Bank also disclosed a similar claim against its credit card company, CAL. The lawsuits, initiated by lawyer Idan Ben David, also name Bank Leumi, Mizrahi Tefahot, Isracard, and Clal Insurance.

Unlike typical class actions against financial entities that usually concern improper charges or unfair financial practices, these lawsuits allege privacy violations through covert tracking mechanisms embedded in emails. The core technology in question is the 'tracking pixel,' a tiny, often one-pixel-sized image invisible to the recipient. When an email is opened and the image is loaded from an external server, it can indicate that the message was opened, noting the time and other technical details. Specialized links can also track clicks, and in some cases, information about the recipient's internet address, device type, and approximate location can be gathered.

While tracking pixels are common in digital marketing to gauge message effectiveness and customer engagement, the plaintiffs claim these financial institutions used them not only in promotional emails but also in service and operational messages without adequate notification or explicit consent. The lawsuits assert that these tracking mechanisms were activated by default, without a simple way for customers to opt-out. The plaintiffs believe this constitutes a violation of privacy protection laws and the disclosure and fairness obligations owed by financial institutions, which already hold sensitive customer data.

The lawsuits, filed in the Tel Aviv District Court, seek financial compensation, disgorgement of alleged profits from the data use, and injunctions to cease unauthorized tracking. The total damages sought are estimated to exceed 2.5 million shekels in each case. These claims have not yet been certified as class actions, and the court has not ruled on the allegations.

Lawyer Idan Ben David explained that even seemingly minor information like when an email is opened can be significant, comparing it to a judge opening a legal document. He noted that such tracking is impermissible without notification, consent, and the ability to withdraw consent, which he claims was not provided. Ben David filed separate lawsuits due to differing legal frameworks applicable to banks, credit card companies, and insurance firms, though he anticipates they may be consolidated. He has been working on this issue for about three years, describing it as a "life project."

Ben David hopes Israeli courts will adopt a stricter stance on privacy, similar to European regulations or a Canadian court ruling that prohibited tracking pixels. He cited cases in Arizona where lawsuits against Home Depot and Target regarding marketing emails were dismissed because the data collected did not fall under the specific communication service records protected by local law. In contrast, France's data protection authority, CNIL, has adopted stricter guidelines requiring consent for pixel use, with some exceptions for operational purposes. The financial institutions involved declined to comment, but their representatives may argue that this is a standard marketing practice for measuring opens and improving communication, or that their privacy policies permit such use. The court will need to determine if the notification and consent met legal requirements, and whether the tracking caused demonstrable personal harm.