The decision of the Lod District Court to approve the filing of a class action against four of the five largest banks in Israel (Leumi, Discount, Mizrahi Tefahot, and First International) has shaken the banking system and puts a huge question mark over the way bank current accounts are treated.
The lawsuit is over a claim that the banks should pay their customers interest on their current account balances, or at least should inform them that they can earn interest by transferring the money to a deposit account. The claim rests on the extreme change in the business environment when interest rates rose.
"On the one hand the banks that hold their customers’ money don’t credit them with any interest, while on the other hand they make use of that money to generate revenue from loans that customers take," Judge Shmuel Bornstein states in his ruling. "The bank produces profits higher than the rate of profit it would produce were it to pay an appropriate and reasonable rate of interest to its customers. This is enrichment that justifies intervention by the court."
In view of the consequences of the decision, the banks are expected to ask for permission to appeal to the Supreme Court. A notice to the Tel Aviv Stock Exchange by Discount Bank states that the bank is seriously considering such a step.
Enrichment
The suit, brought by bank customers Noam Brodsky, Natalie Sherban, Saar Brodsky and Zvi Hoch, though Adv. Yitzhak Aviram and Adv. Shahar Ben Meir, relates to the activity of the four banks in the period 2022-2025. Of the total amount held in current accounts by these four banks, Bank Leumi held 50%, Mizrahi Tefahot 24%, First International 14%, and Discount Bank 12%. According to the claimants, the total amount of money on which these banks paid no interest was about NIS 400 billion. The total damage caused to the class is estimated by the claimants at between NIS 3,62 billion and NIS 5.06 billion.
A separate suit was filed against Bank Hapoalim. This is expected to reach the evidence stage in January. Bank Hapoalim offers a service whereby money in a current account is diverted to a deposit account, and the main question to be decided is on the way this service is made accessible to the public.
It should be stressed that the decision in the lawsuit brought against the other four banks concerns approval for the suit to be conducted as a class action, and is not on the substance of the case. A ruling on the lawsuit itself is still a long way off.
Judge Bornstein approved the lawsuit on the main grounds of "unlawful enrichment." He rejected other grounds, such as deception, breach of fiduciary duty, and breach of the obligation of bona fides.
Legal experts and banking industry sources are divided on the significance of the court’s decision. "There is a degree of unfairness in the conduct of the banks and in the profits that they have made in the past few years that needs to be confronted. This is therefore a bold decision. Even if from a legal point of view it is difficult or incorrect, in the end the judge’s decision could be to the public’s benefit," a lawyer specializing in the sector said.
In practice, the assessment on the market is that one of two things will happen. One is that the Supreme Court will reverse the decision. The second is that the decision will survive the Supreme Court, and that that will have an immediate effect. "If the Supreme Court approves the filing of the lawsuit, my guess is that banks will find a way of settling the case for billions of shekels," another lawyer said.
There are those who warn that the District Court’s decision is unprecedented and far-reaching. A lawyer in the banking industry who spoke to "Globes" described the decision as "a big mistake from a legal point of view," and estimated that the chances that it would stand in the Supreme Court were not high. "The idea of a bank is not that you put money in a safe there but that the money changes hands and the bank has to make it available to you at any time. There is no unlawful enrichment here."
A source in the industry with experience in cases such as this says he was surprised by the decision. "This is highly unprecedented because it involves a change in the law. All of us resent the banks because they take advantage of the fact that we’re busy or preoccupied, but this has no justifiable legal basis. The judge diverged from years of banking law in which ownership of a bank current account was not considered a property right but as the subject of a contract in which the bank has to make the money available at any time."
Another difficulty to which industry sources point is that the court decision contradicts the stance of the supervisor of banks at the Bank of Israel, which is the regulatory body for the banks. The supervisor of banks supported the position of the banks in the proceedings, and the court decided otherwise. Sources in the market say that this is an exceptional situation, and that the court generally adopts the position of the regulator or interprets it.
The public will pay?
Although the tendency is to think that a decision like this, which sends a sharp message to the banks, will result in reduced costs to bank customers in the short or long term through interest payments on current account balances, lawyers in the sector warn of negative economic consequences.
"A large retroactive liability could affect the pricing of bank products, since the costs of running the system won’t disappear," one source explains. "If the banks are obliged to pay significant rebates on account of the past, in the future they may reprice products in order to maintain an economic balance and manage risks. The fear is therefore not just of ad hoc rises in the cost of credit or of services, but of less flexibility on the part of the banks in offering benefits and differential pricing. Large regulatory or legal costs are liable, at least in part, to be rolled onto the entire public."
Published by Globes, Israel business news - en.globes.co.il - on October 11, 2026.
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