Judge Rejects JPMorgan Chase Bid to Kill Cash Sweep Lawsuit

A class action lawsuit targeting JPMorgan Chase’s cash sweep program can move forward after a federal judge rejected the bank’s request to dismiss the suit, Reuters reported Friday (Feb. 13).

In a Thursday (Feb. 12) ruling, the judge said JPMorgan Chase must face the plaintiffs’ claims that the bank breached deposit account agreements by paying near-zero interest rates while the federal funds rate rose above 5%, and breached individual retirement account agreements by failing to pay a “reasonable rate,” according to the report.

JPMorgan Chase had sought to have the lawsuit dismissed by saying that the bank followed customers’ “instructions” to deposit their uninvested cash in interest-bearing accounts, per the report.

While allowing that part of the lawsuit to advance, the judge dismissed the plaintiffs’ claims that JPMorgan Chase breached its fiduciary duties and failed to act in the customers’ best interests. The judge said the automatic enrollment of customers in the cash sweep program was not a “recommendation” by the bank or brokers, according to the report.

Several lawsuits targeting cash sweep accounts of banks and brokerages were filed in 2023 and 2024, with mixed results, per the report. A case against Wells Fargo was narrowed by a judge but not dismissed; one against U.S. Bancorp was dismissed; and civil charges against Wells Fargo and Bank of America led to a combined $60 million settlement with the Securities and Exchange Commission, without the banks admitting wrongdoing.

In the case that led to the January 2025 settlement involving Wells Fargo advisory firms Wells Fargo Clearing Services and Wells Fargo Advisors Financial Network and Bank of America’s Merrill Lynch, the SEC alleged that the firms violated Advisers Act rules by failing to consider the best interests of their clients when selecting which cash sweep program options to offer them and did not fulfill the duties of financial advisers in managing client cash in advisory accounts.

Wells Fargo told PYMNTS at the time of the settlement: “Our agreement with the SEC puts this broader industry matter behind us, and as the settlement states, we have already successfully addressed the issues covered by the resolution.”

Merrill Lynch told PYMNTS at the time: “As the SEC noted, Merrill took several significant steps before becoming aware of the Commission’s investigation, including increasing the rates paid to advisory clients in Merrill’s Bank Deposit Program, lowering the minimum thresholds for investing cash in certain money market funds, and adopting and implementing enhanced supervisory procedures.”