By Jonathan Stempel
NEW YORK, Feb 13 (Reuters) – JPMorgan Chase must face part of a proposed class action lawsuit accusing the largest U.S. bank of paying brokerage and retirement account holders near-zero interest rates instead of market rates on their idle cash, a federal judge ruled.
Customers alleged that the Cash Sweep programs in which they were automatically enrolled “siphoned billions of dollars in net interest income,” by paying artificially low 0.01% to 0.03% interest even as the federal funds rate and rates on short-term U.S. Treasury bills rose above 5%.
In a decision on Thursday, U.S. District Judge Lorna Schofield in Manhattan said JPMorgan must face claims it breached deposit account agreements by failing to adjust interest rates “based on business and economic conditions,” and breached individual retirement account agreements by failing to pay a “reasonable rate” of interest.
The judge also dismissed claims that JPMorgan breached its fiduciary duties and failed to act in customers’ best interest. She said automatic enrollment in the Cash Sweep programs was not a “recommendation” by JPMorgan or brokers.
JPMorgan declined to comment on Friday.
In seeking a dismissal, the New York-based bank said it honored customers’ “instructions” to deposit uninvested cash into interest-bearing accounts, and the plaintiffs were “seeking a windfall for decisions they elected not to make.”
Lawyers for the plaintiffs did not immediately respond to requests for comment. The proposed class action covers JPMorgan customers since August 24, 2018.
Many large banks and brokerages were sued in 2023 and 2024 by customers who said sweep accounts weren’t keeping up with rising interest rates.
The lawsuits have had mixed success. A federal judge in San Francisco narrowed but refused to dismiss one such lawsuit against Wells Fargo, while a federal judge in St. Paul, Minnesota dismissed a similar case against U.S. Bancorp last month.
In January 2025, units of Wells Fargo and Bank of America agreed to pay a combined $60 million to settle U.S. Securities and Exchange Commission civil charges over their cash sweep practices. Neither bank admitted wrongdoing.
(Reporting by Jonathan Stempel in New York; Editing by David Holmes)
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