End of saga: Banks to compensate customers over unpaid checking interest as court approves settlement

Just days after approving a class action against major banks, the District Court gives force to a settlement agreement reached between the parties. This brings an end to the legal battle surrounding claims of unjust enrichment by the banks at customers' expense during the rate increase period.

The Central-Lod District Court approved a settlement agreement in a class action lawsuit filed against banks, including Mizrahi Tefahot and First International Bank of Israel, for non-payment of interest on positive checking account balances. The settlement comes shortly after the lawsuit was certified as a class action, concluding legal proceedings based on claims of unjust enrichment.

The legal battle surrounding the non-payment of interest on positive checking account balances has reached a swift conclusion: The Central-Lod District Court approved a settlement agreement in the class action filed against a group of banks, including Mizrahi Tefahot Bank and First International Bank of Israel. The development, reported on September 24, 2026, comes just one day after the court gave the green light to certify the lawsuit as a class action, marking a quick end to proceedings that generated wide interest.

The settlement concludes the lawsuit, which was based on the claim that banks unjustly enriched themselves at their customers' expense. According to the plaintiffs, during a period when the Bank of Israel benchmark interest rate rose sharply, the banks profited from funds resting in checking accounts without sharing these profits with customers via interest payments, as they typically do with deposits.

The legal proceedings, which began with the original petition filed in June 2023, gained significant momentum on September 23, 2026, when the court certified it as a class action. The class on whose behalf the lawsuit was certified was broadly defined to include retail and business customers who met one of two conditions: a positive balance of ₪3,000 or more for at least one business day, or a positive balance of ₪1,000 or more for three consecutive business days. The relevant period for the lawsuit was set from April 2022 to May 2025, a period marked by sharp interest rate hikes across the economy.

Now, with the settlement's approval, a lengthy and complex trial has been avoided. For the banks, the compromise eliminates uncertainty and the legal and financial exposure tied to defending a class action of this scale. For the plaintiffs and the broader public, the agreement secures a degree of compensation for the practice.

At this stage, the full details of the settlement, including the exact compensation amount for each eligible customer and the distribution mechanism, have not yet been fully disclosed in immediate TASE filings. However, court approval itself guarantees that class members will receive some form of benefit—whether through direct monetary compensation, a future benefit, or a combination of both. The court's approval was contingent on being satisfied that the settlement is fair, reasonable, and appropriate for all represented class members.

The swift resolution highlights mounting public and regulatory pressure on the banking system to adjust its operating model to changing interest rate environments and share the resulting profits with customers, even on basic products like checking accounts.