By Jonathan Stempel
NEW YORK, Oct 1 (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.
The preliminary settlement was filed late Wednesday in Manhattan federal court and requires approval by US District Judge Valerie Caproni.
In a separate case, US District Judge Margaret Garnett in Manhattan ordered Merrill Lynch to face most of
a similar proposed class action covering retirement and non-retirement accounts. Her decision was dated Wednesday and made public on Thursday.
Many large banks and brokerages have been sued for allegedly "sweeping" customers' cash into accounts that paid low or near-zero interest instead of market rates, boosting profits. These lawsuits proliferated in 2023 and 2024 when interest rates were rising.
The settlement resolved claims by holders of Merrill Edge online accounts between December 15, 2016 and March 15, 2020 that allegedly paid 0.05% to 0.14% while other brokerages paid their customers about 2%.
Merrill Lynch denied wrongdoing. It agreed in January 2025 to pay $25 million to settle cash sweep claims by the US Securities and Exchange Commission, without admitting wrongdoing.
In the other lawsuit, Garnett said customers could try to prove that Merrill Lynch breached its contractual obligations by denying them a "reasonable rate" of return that reflected economic and business conditions.
Merrill Lynch had urged Garnett to at least "significantly" narrow the case, in part because it removed the "reasonable rate" provision from customer agreements in 2023 and 2024.
Bank of America declined to comment on the settlement and had no immediate comment on Garnett's decision.
Adam Blander, a lawyer for the settling customers, called their accord "very beneficial" for the class. Lawyers for the other customers did not immediately respond to requests for comment.
Lawsuits over low-yielding sweep accounts have had mixed success.
In February, a third Manhattan federal judge said JPMorgan Chase must face part of one such lawsuit. On September 18, a fourth 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 and David Gregorio)
