Settlement Overview
Bank of America’s brokerage arm, Merrill Lynch, has agreed to pay $39 million to resolve a class‑action lawsuit alleging that it swept cash from customers’ retirement accounts into low‑interest accounts. The preliminary settlement was filed in a Manhattan federal court and awaits approval from U.S. District Judge Valerie Caproni.
Scope of the Claims
The case pertains to holders of Merrill Edge online accounts between 15 December 2016 and 15 March 2020. Plaintiffs allege that the cash‑sweep program credited interest rates ranging from 0.05 % to 0.14 %, whereas comparable brokerages were offering roughly 2 % during the same period.
Related Litigation
In a separate proceeding, U.S. District Judge Margaret Garnett issued an order allowing a similar proposed class action—covering both retirement and non‑retirement accounts—to move forward. Judge Garnett noted that customers could attempt to demonstrate that Merrill Lynch breached contractual obligations by failing to provide a “reasonable rate” of return reflective of prevailing economic conditions.
Prior Settlement and Corporate Position
Merrill Lynch denied any wrongdoing in the current case. The firm previously settled a related cash‑sweep matter with the U.S. Securities and Exchange Commission in January 2025, paying $25 million without admitting liability. In its defense before Judge Garnett, Merrill Lynch argued for a significant narrowing of the case, pointing out that it had removed the “reasonable rate” provision from its customer agreements in 2023 and 2024.
Regulatory and Legal Context
These cash‑sweep lawsuits have risen in frequency throughout 2023 and 2024, coinciding with a period of rising interest rates, as plaintiffs contend that brokers profited by offering near‑zero returns on idle cash while market rates were higher.