Israeli Court Approves Billion-Shekel Class Action Against Major Banks Over Current Accounts

A landmark decision by the Central District Court in Lod to approve a class-action lawsuit against four of Israel's five major banks—Leumi, Discount, Mizrahi Tefahot, and First International—has sent shockwaves through the banking sector, casting a massive shadow over current-account practices.

The lawsuit argues that Israeli banks should have either paid interest on current-account (overdraft/checking) balances or at least informed customers that interest could be earned by depositing funds into savings accounts. The claim rests on the dramatic shift in the business environment when interest rates rose across the board.

"On one hand, banks holding customer funds do not credit them with any interest, and on the other hand, they use those very same funds to generate revenue from loans they extend," Judge Shmuel Bornstein ruled. "The bank generates a profit exceeding the rate it would have yielded had it paid fair and reasonable interest to its customers. This is unjust enrichment that justifies court intervention."

Potential Consequences and Industry Divide

Given the far-reaching implications, the banks are expected to file an application for leave to appeal to the Supreme Court. Discount Bank indicated in a stock exchange filing that it is weighing this step carefully. Experts remain deeply divided on whether the ruling will ultimately benefit the public.

The lawsuit, filed by customers Noam Brodsky, Nathalie Sherban, Saar Brodsky, and Tzvika Hoch through attorneys Yitzhak Aviram and Shahar Ben Meir, targets four major banks over the 2022–2025 period. Bank Leumi holds the largest share of these funds at roughly 50%, followed by Mizrahi Tefahot (24%), First International (14%), and Discount (12%).

Total non-interest-bearing deposits across the four banks are estimated at around NIS 400 billion, with total alleged damages ranging between NIS 3.62 billion and NIS 5.06 billion. Meanwhile, a separate lawsuit against Bank Hapoalim is heading toward evidentiary hearings in January.

Legal Experts Voice Skepticism

Critics warn that the Central District Court's ruling is unprecedented and legally flawed. "The idea behind a bank is not that you place money in a safe, but that money changes hands and the bank must make it available to you at any time. There is no unjust enrichment here. This goes too far," one banking attorney noted.

Adv. Hela Peleg, co-head of the litigation division at Agmon with Tulchinsky, explained the core legal challenge: "The ruling establishes a far-reaching legal novelty: it seeks to establish a duty of restitution based purely on the bank's profitability from current accounts, even though the relationship was governed by contract and no specific statutory provision was violated."

Prof. Yehonatan Givati of the Hebrew University Faculty of Law added: "I hope it gets overturned in the Supreme Court. In his ruling, Judge Bornstein raised the possibility that the entire financial intermediation system, which is so vital to the economy, is illegal."

Whether the ruling survives Supreme Court scrutiny or prompts a multi-billion-shekel settlement, the banking sector faces a profound reckoning over how it handles customer liquidity in a high-interest-rate era.