A federal judge in Manhattan has determined that JPMorgan Chase must face parts of a proposed class action alleging the bank paid near-zero interest rates to customers on idle cash parked through its Cash Sweep programs.
The lawsuit contends that the automatic sweep of uninvested brokerage and retirement account cash into interest-bearing deposit accounts generated "billions of dollars in net interest income" for the bank, while customers received rates described in the complaint as artificially low - typically in the range of 0.01% to 0.03% - at the same time that the federal funds rate and yields on short-term U.S. Treasury bills exceeded 5%.
In a decision issued on Thursday, U.S. District Judge Lorna Schofield said JPMorgan must defend claims that it breached deposit account agreements by not adjusting the interest rates it paid "based on business and economic conditions." The judge also allowed claims that the bank violated individual retirement account agreements by failing to pay a "reasonable rate" of interest.
At the same time, Judge Schofield dismissed the plaintiffs' allegations that JPMorgan breached fiduciary duties or failed to act in customers' best interests. The court found that the bank's automatic enrollment of customers into Cash Sweep programs did not amount to a "recommendation" by JPMorgan or by brokers.
JPMorgan declined to comment on the ruling. In court filings seeking dismissal, the bank argued that it followed customers' directions to deposit uninvested cash into interest-bearing accounts and characterized the plaintiffs' position as an improper effort to secure a windfall for decisions the customers chose not to make.
Attorneys for the plaintiffs did not immediately reply to requests for comment. The proposed class would encompass JPMorgan customers with relevant accounts dating back to August 24, 2018.
The litigation is part of a broader wave of lawsuits filed in 2023 and 2024 targeting large banks and brokerages over cash sweep practices and whether amounts paid to customers kept pace with rising interest rates. Those cases have produced mixed outcomes in federal courts.
For example, a federal judge in San Francisco narrowed but refused to dismiss a similar suit against Wells Fargo, while a federal judge in St. Paul, Minnesota dismissed a comparable action against U.S. Bancorp last month. Separately, in January 2025, units of Wells Fargo and Bank of America agreed to pay a combined $60 million to resolve civil charges brought by the U.S. Securities and Exchange Commission related to their cash sweep practices; neither bank admitted wrongdoing in that settlement.
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