Update, October 24, 2026: According to an immediate report by the bank, the Tel Aviv-Jaffa District Court approved the settlement on April 23, 2026. The report does not state the case number or the amount. The decision page in the database.
On November 13, 2025, a motion to approve a settlement was filed with the Tel Aviv District Court in Class Action 28695-05-16, Shefagat Ltd. v. Mizrahi Tefahot Bank. The class action was filed in May 2016. In its financial report for the first quarter of 2025, the bank described it as a claim in which the alleged damage was put, by way of estimate, at NIS 220 million (Note 10).
The amount the bank agreed to pay for the past: NIS 17,855,040. According to the agreement, this amount "is final, and no payments of any kind will be added to it". Alongside it, the agreement sets payments for 2025-2026, which the mediator estimated at about NIS 5.4 million, and changes in the way the bank classifies its business customers.
In brief
- The claim: Mizrahi Tefahot classified corporations entitled to be a "small business" as a "large business", even when they had given it a financial report showing low turnover, and charged them higher fees.
- The bank denied this. It argued that it acted lawfully, informed its customers, and that the responsibility for initiating a change of classification lies with the customer.
- After mediation before Prof. Sharon Hannes, the parties reached a settlement, with no admission by either party.
- The bank will pay NIS 960 for each year in which an eligible corporation was classified as a "large business". Total for the period through the end of 2024: NIS 17,855,040.
- The payment is made automatically to the corporation's account, with no need to apply.
- The bank undertook to classify accounts according to the financial report submitted to it, and to notify customers classified as a "large business" of their right to request a different classification.
What the class action was about
The Banking (Customer Service) (Fees) Rules, 5768-2008, took effect on July 1, 2008 and set a supervised fee schedule for individuals and "small businesses". A corporation that is not a "small business" pays according to the large business fee schedule. According to the wording the bank undertook to send its customers, a corporation is a "small business" when it has given the bank an annual report showing that its business turnover in the previous year did not exceed NIS 5 million, subject to the exceptions in the Rules.
According to the notice published by the bank, the applicant argued that many corporations that gave the bank a financial report showing turnover below the ceiling remained classified as a "large business", and were therefore charged high fees. It was also argued that the bank did not disclose to customers their right to the more favorable classification, and thereby acted "to frustrate the 2008 bank fee reform".
The bank argued that it acted in accordance with the law, informed its customers over the years of the classification option, and that the responsibility for requesting a change of classification lies with the customer. In its view, submitting a financial report does not, by itself, require it to change the classification automatically.
What the settlement agreement provides
As part of the mediation, Ernst & Young (EY) was appointed as an external accounting expert. EY examined the years 2013 to 2023, and the bank examined 2024 using the same methodology. Each year in which a corporation that submitted a financial report was, according to the examination, entitled to be classified as a "small business" is called an "event" in the agreement.
For each event the bank will pay NIS 960: NIS 800 for the classification cause of action and NIS 160 for the additional causes of action. Our calculation: NIS 17,855,040 divided by NIS 960 is 18,599 events, that is, about 18,600 account-years of corporations that, according to the EY examination and for the purposes of the settlement only, were entitled to be classified as a "small business" and were not classified that way. The agreement provides that this total amount will not increase, and that if certain eligible parties cannot be located, their share will be divided equally among the other eligible parties.
For the interim period, January 1, 2025 to December 31, 2026, a corporation that submitted a financial report is entitled to a refund of the fee difference compared with the small business rate. Instead of an individual examination, the bank may pay NIS 1,200 per year for each eligible account. According to the mediator's estimate, the amount for this period will be about NIS 5,400,000.
How to get the money
According to the agreement, there is no need to file an application. The credit is made to the corporation's account within 3 months of the determining date, which is 3 months after the agreement is approved by a final judgment, or an earlier date, and appears in the account statements with the description "ת"צ 28695-05-16" (Class Action 28695-05-16). For anyone without an active account, the bank is to send a cheque to the updated address, valid for 90 days. Money from cheques that are not cashed will be divided among the eligible parties who have an open account. If the corporation has an unpaid debt to the bank, the amount of the debt will be set off against the payment.
What the bank undertook to change
- To classify every account of a customer who submitted a financial report according to the business turnover in the report, "whatever the reason for submitting the financial report may be".
- To adopt an internal procedure under which a report submitted in the ordinary course of business will also lead to a review of the classification.
- To set up a dedicated page on its website about the option of changing the classification to small business.
- To allow submission of a financial report and a request to change classification through the personal area on the website.
- To send all customers classified as a "large business" a notice of the conditions for classification as a small business, and to keep sending an annual notice for at least 7 years.
Where the proceeding stands
The notice of the filing of the motion to approve the settlement was published in a wording approved by the court (Judge D. Hasdai). The deadline for filing objections and requests to opt out of the class was set for December 31, 2025. As of the time of writing, we did not find a public report of the settlement being approved by a judgment. The agreement will take effect only if it is approved, and will then be res judicata for all class members.
This proceeding also reached the Supreme Court: in Leave to Appeal (Civil) 8674/19, the Supreme Court in 2021 granted motions for leave to appeal filed by the applicants in the proceeding, and the decision appears in the database of court rulings against Mizrahi Tefahot Bank.
The article is based on the settlement agreement and on the notice of the filing of the motion to approve it, as published by Mizrahi Tefahot Bank on its website (the settlement agreement, the notice), and on Note 10 to the bank's financial report for the first quarter of 2025. The full and binding text is the text of the agreement. The article is not legal advice. The site will publish the bank's response, if one is received.
Frequently asked questions about the settlement
Who is entitled to money from the settlement in Class Action 28695-05-16?
According to the settlement agreement, the eligible parties are Mizrahi Tefahot customers who, in the period from July 1, 2008 to December 31, 2026, were entitled, according to the applicant's position, to be classified as a "small business", and nevertheless paid fees at the large business rate. In practice, eligibility is determined by a list prepared by EY, based on financial reports the corporations gave the bank.
Do you need to apply to receive the money?
According to the agreement, no. The payment is made to the eligible corporation's account within 3 months of the determining date, and will appear in the account statements with the description "ת"צ 28695-05-16" (Class Action 28695-05-16). Anyone who no longer has an active account at the bank should receive a cheque at their updated address with the bank, valid for 90 days.
How much money does each corporation receive?
The agreement sets NIS 960 per "event", meaning each year in which an eligible corporation was classified as a "large business" after submitting a financial report: NIS 800 for the classification cause of action plus NIS 160 for additional causes of action. In the interim period, 2025-2026, the bank may pay NIS 1,200 per year for each eligible account.
Did the bank admit that it overcharged fees?
No. The agreement states that it contains no admission by either party of the other party's claims. In its response to the motion for certification, the bank argued that it acted lawfully and informed its customers, and that the responsibility for initiating a change of classification lies with the customer.
What is a "small business" under the Fees Rules?
According to the wording of the notice the bank undertook to send, a "small business" is, among other things and subject to the exceptions in the Banking (Customer Service) (Fees) Rules, 5768-2008, a corporation that gave the bank an annual report showing that its business turnover in the year before submission did not exceed NIS 5 million.
What can my company do today?
Check the account statements for a credit with the description "ת"צ 28695-05-16" (Class Action 28695-05-16), and check in the personal area of the bank's website how the account is classified. According to the agreement, the bank undertook to allow submission of a financial report and a request to change classification through the personal area, and to classify every account according to the business turnover in the financial report submitted to it.