A class action lawsuit alleging JPMorgan Chase breached its deposit account agreements by offering minimal interest rates while the federal funds rate climbed is permitted to proceed, a federal judge ruled Thursday, according to a report from Reuters.
The lawsuit centers on JPMorgan Chase’s cash sweep program, which automatically places uninvested customer funds into interest-bearing accounts. Plaintiffs claim the bank failed to provide a “reasonable rate” of return on individual retirement accounts and violated deposit account agreements by maintaining near-zero interest rates as the Federal Reserve raised its benchmark rate above 5%.
Judge Analisa Torres allowed the claims regarding the breach of deposit and IRA agreements to move forward. However, she dismissed allegations that JPMorgan Chase breached its fiduciary duty to customers and failed to act in their best interests. The judge determined that the automatic enrollment in the cash sweep program did not constitute a “recommendation” from the bank or its brokers, as defined by legal standards.
JPMorgan Chase had argued that it simply followed customer “instructions” by depositing uninvested cash into these accounts, a defense the judge found insufficient to dismiss the core claims.
The ruling comes amid a wave of similar lawsuits filed in 2023 and 2024 targeting cash sweep programs offered by major financial institutions. A case against Wells Fargo remains active, though narrowed by a judge. A similar suit against U.S. Bancorp was dismissed. In January 2025, Wells Fargo and Bank of America reached a combined $60 million settlement with the Securities and Exchange Commission (SEC) related to cash sweep practices, though neither bank admitted wrongdoing.
The SEC alleged that Wells Fargo advisory firms, Wells Fargo Clearing Services and Wells Fargo Advisors Financial Network, and Bank of America’s Merrill Lynch, violated Advisers Act rules by not prioritizing client interests when selecting cash sweep program options and failing to adequately manage client cash in advisory accounts.
Following the settlement, Wells Fargo stated it had “already successfully addressed the issues covered by the resolution.” Merrill Lynch noted it had proactively increased rates paid to advisory clients and enhanced supervisory procedures prior to the SEC’s investigation.
