Bank of America to pay $39 million to settle customer claims over low interest rates on cash

Bank of America's Merrill Lynch unit is set to pay $39 million to resolve a class action lawsuit alleging that the brokerage failed to provide customers with fair interest rates on idle cash in their retirement accounts. The settlement, filed in Manhattan federal court on Wednesday, requires approval from US District Judge Valerie Caproni and will avert a trial originally scheduled for mid-October.

The lawsuit, brought forth by holders of Merrill Edge online accounts between December 15, 2016 and March 15, 2020, accused Merrill Lynch of violating their client agreements by automatically transferring cash balances into deposit accounts with interest rates far below the market rate. The complaint stated that these sweep accounts yielded between 0.05% and 0.14%, while other brokerages were offering customers around 2%.

Merrill Lynch has denied any wrongdoing in agreeing to settle, with a Bank of America spokesperson declining to comment on the matter. Lawyers representing the brokerage customers have not yet provided any comment.

The issue of low-yielding sweep accounts has been a recurring concern among customers, particularly in 2023 and 2024 when customers claimed that these accounts were failing to keep pace with rising interest rates. Similar lawsuits have been filed against numerous large banks and brokerages, with mixed success. In February, another Manhattan federal judge ordered JPMorgan Chase to face part of a lawsuit, and on September 18, a third Manhattan federal judge approved a $70 million settlement with Oppenheimer & Co.