By Jonathan Stempel
NEW YORK, Sept 30 (Reuters) – Bank of America’s Merrill Lynch unit will pay $39 million to settle a class action claiming it paid brokerage customers near-zero interest rates instead of market rates on idle cash in their retirement accounts.
Settlement papers were filed late on Wednesday in Manhattan federal court. The settlement requires approval by US District Judge Valerie Caproni, averting a trial that had been scheduled for mid-October.
• Holders of Merrill Edge online accounts between December 15, 2016 and March 15, 2020 accused Merrill Lynch of breaching its client agreements by automatically sweeping cash balances into deposit accounts that paid less than a “reasonable rate” of interest.
• The complaint said the sweep accounts carried annual yields of 0.05% to 0.14%, while other brokerages were paying customers about 2%.
• Merrill Lynch denied wrongdoing in agreeing to settle. A Bank of America spokesperson declined to comment. Lawyers for the brokerage customers did not immediately respond to requests for comment.
• Many large banks and brokerages have been sued over low-yielding sweep accounts, especially in 2023 and 2024 when customers said those accounts were not keeping up with rising interest rates. The lawsuits have had mixed success.
• In February, another Manhattan federal judge said JPMorgan Chase must face part of one such lawsuit. On September 18, a third Manhattan federal judge granted final approval to a $70 million settlement with Oppenheimer & Co.
(Reporting by Jonathan Stempel in New York; Editing by Sanjeev Miglani)
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