Class Action 18101-09-20 Smooha: Mizrahi Tefahot will pay NIS 1 million in compensation over correspondent bank fees

Background: correspondent bank fees on foreign currency transfers at Mizrahi Tefahot

On September 8, 2020, the applicants (Smooha et al.) filed a motion with the Central District Court (Lod) to certify a class action, Class Action 18101-09-20. The motion was directed against Bank Hapoalim, Mizrahi Tefahot Bank and First International Bank.

The class action concerned foreign currency transfers abroad under the OUR option, in which the customer bears all the fees and expenses. In such a transfer, an intermediary bank abroad, the correspondent bank, charges expenses to the Israeli bank, and the bank charges them to the customer.

The parties' arguments

According to the applicants, the banks did not disclose to customers, before carrying out the transaction, the amount of the correspondent bank's expenses. It was also alleged that the banks charged amounts beyond the "actual cost" they paid. In their view, this amounted to misleading, breach of statutory duty, and charging contrary to the full fee schedule and the rules on proper disclosure.

The banks argued that they cannot know the rate of the correspondent's expenses in advance, but only after the fact, once the bank abroad charges them. First International qualified this with respect to the first correspondent. The banks also argued that they charged customers only the actual cost.

The court asked for the position of the Supervisor of Banks. On November 24, 2021, the regulator clarified that the banks must reflect in the fee schedule the "maximum actual expense", and present at the time of the transaction at least the maximum price. On February 16, 2022, the Supervisor sent a letter on the subject to the banks' CEOs.

What the court decided: NIS 1 million settlement with Mizrahi Tefahot

On the court's recommendation, the parties went to mediation before Prof. Alon Klement and Adv. Shoshi Neri. The settlement was filed for approval on August 7, 2025. On March 8, 2026, Judge Shmuel Bornstein approved it.

Under the settlement, each bank will compensate "eligible customers": customers who made a foreign currency transfer under the OUR option after February 16, 2022. Mizrahi Tefahot will pay NIS 1,000,000, Bank Hapoalim NIS 1,500,000 and First International NIS 400,000. Each bank's amount will be divided equally according to the number of eligible customers.

According to the motion to approve the settlement, the amounts were set according to the banks' estimate in the mediation, about 25% of the correspondent expenses charged from February 16, 2022 through 2025. At Mizrahi Tefahot, the expenses in the years 2022 to 2025 were estimated at about NIS 4 million. The settlement was made, in its own words, "beyond the letter of the law" (lifnim mishurat hadin) and without admission by the banks. For the future, it was set that the banks will act according to the guidelines of the Banking Supervision Department, which is conducting a regulatory process on the subject.

The State's position and the court's decision

The professional bodies of the State did not object to the settlement, but commented on the scope of the res judicata. The settlement applies to customers from September 8, 2013, but compensation is given only for transactions from February 16, 2022. In their view, the duty of disclosure existed earlier as well, and the earlier period should also be compensated, or at least res judicata should not apply to it.

The parties replied that there had not always been a duty to present the cost. In their view, the change, to the extent there was one, came only with the Supervisor's letter of December 10, 2025, which stated that the maximum price is only one of the ways to reflect the cost. They added that presenting a maximum cost means an arbitrary amount that may mislead, and that the settlement benefits customers beyond what is required.

The court did not accept the comment. It held that the legal position before the regulator's letter was at the very least unclear, and joined Justice Grosskopf's remarks that there is doubt whether a duty to disclose the maximum cost exists. The court did not appoint an examiner, because the settlement was reached with the help of experienced mediators and the data do not require special expertise. In its words, an examiner would delay implementation and make it more expensive without real benefit.

The court added that the settlement presents an efficient and simple way of compensation, and that thanks to the regulatory process, future regulation is in practice also taking place. It ordered a notice of the approval to be published in two of the four most widely circulated daily newspapers, at the banks' expense.

Award and legal fees

The court approved the recommendation. Mizrahi Tefahot will pay NIS 230,000 in legal fees to the applicants' counsel and NIS 20,000 as an award to the applicants, plus VAT. Under the agreement, these amounts are paid in addition to the refund to customers.

Quotes from the decision

The settlement the parties reached with the help of the mediators, including with respect to the refund amount and the group of eligible customers, properly reflects the full range of risks and prospects in the proceeding.

Paragraph 21 of the judgment, page 7 (translated from Hebrew).

Indeed, in the ordinary case there is no reason to subject class members who are not entitled to compensation to the res judicata derived from an approved settlement.

Paragraph 22 of the judgment, page 7 (translated from Hebrew).

Who is eligible and what to do

• Eligible: Mizrahi Tefahot customers, including large businesses, who made a foreign currency transfer under the OUR option after February 16, 2022 and were charged correspondent bank expenses.
• Open account: the amount will be paid directly into the account within 30 days of the date on which the approving judgment became final, without a fee.
• Closed account and a net amount above NIS 50: the bank will send a letter to the registered address, and you must contact it within 30 days with account details. If the letter is returned, the bank will check with the Population Registry.
• Closed account and a net amount below NIS 50: the amount will be transferred to the fund for managing and distributing monies awarded as relief.

What it means for Mizrahi Tefahot customers

The settlement does not determine that the bank broke the law, and it expressly states that it contains no admission by the banks. It concerns the claim that in OUR transfers, customers were charged expenses of a bank abroad whose amount was not shown to them in advance, and the regulator's position that at least a maximum price must be disclosed.

A customer who made such a transfer can check the account statements to see whether a credit was received, and ask the bank for a breakdown of the third-party expenses charged. Other proceedings in the foreign currency field appear in the rulings database, including the class action over the SWIFT fee.

Sources

• The settlement agreement and judgment in Class Action 18101-09-20 (March 8, 2026), on the Mizrahi Tefahot Bank website

Frequently asked questions about court rulings against Mizrahi Tefahot Bank

How to cite

Class Action 18101-09-20 (Smooha et al. v. Bank Hapoalim, Mizrahi Tefahot Bank and First International Bank), Central District Court (Lod), 08.03.2026. Source: Net HaMishpat (Israeli courts database), case Class Action 18101-09-20 (Smooha et al. v. Bank Hapoalim, Mizrahi Tefahot Bank and First International Bank).