JPMorgan Chase is facing a reduced but ongoing lawsuit in Manhattan federal court over allegations that it paid minimal returns to customers on brokerage and retirement cash accounts while short-term interest rates rose. Yesterday, a federal judge ruled that the bank must face parts of a proposed class action targeting its automatic cash-sweep programs, which plaintiffs say resulted in low returns for investors, while some broader fiduciary claims were dismissed.
What the judge ruled
U.S. District Judge Lorna Schofield in Manhattan allowed customers to press claims that JPMorgan breached deposit-account agreements by not adjusting interest rates “based on business and economic conditions” and that it violated individual retirement-account agreements by failing to pay a “reasonable rate” of interest, as reported by Reuters. At the same time, she dismissed counts accusing the bank of breaching fiduciary duties and failing to act in customers’ best interests, cutting back the case to what the written contracts actually promised and what customers ultimately received.
Automatic enrollment not a recommendation
Schofield also wrote that automatically placing customers into the Cash Sweep programs “was not a ‘recommendation’ by JPMorgan or brokers,” undercutting the investors’ push to treat the sweep setup as personalized investment advice, according to Reuters. By trimming the fiduciary-duty arguments while leaving the breach-of-contract theories on the table, the ruling narrows the fight to the fine print and how sweep rates were actually set.
Regulatory pressure and prior enforcement
The lawsuit arrives as regulators keep a close eye on cash sweeps. In January 2025, the SEC announced settled administrative actions that led to a combined $60 million in civil penalties against Wells Fargo and Merrill over sweep practices and said some firms had offered bank-deposit sweeps as the only cash option for many advisory clients, according to the SEC. Those enforcement moves, together with a wave of 2023–24 lawsuits, have already pushed changes across wealth managers and helped spur consolidated litigation in New York federal court, Law360 has reported.
What plaintiffs allege and JPMorgan's defense
Plaintiffs say the Cash Sweep programs paid artificially low interest, allegedly as little as 0.01% to 0.03%, even while federal-funds and short-term Treasury yields rose above 5%, siphoning “billions of dollars” in net interest income from their idle cash, according to filings reported by MarketScreener. JPMorgan, in its motions to dismiss, has countered that it simply followed customers’ instructions to park uninvested cash in interest-bearing accounts and argued that the investors are “seeking a windfall” for trades and rate choices they opted not to make. The proposed class runs back to Aug. 24, 2018, and the consolidated case is captioned In re JP Morgan Chase Cash Sweep Program, No. 1:24-cv-06404 (S.D.N.Y..
What to watch next
With the contract claims intact, the case is expected to move into discovery and a looming battle over class certification that will determine how many customers might ultimately share in any recovery. Similar suits around the country have yielded mixed rulings and fragmented outcomes, Law360 has noted. If a class is certified, the stakes jump sharply and the litigation could tilt toward a settlement or a broader ruling with the potential to influence how brokerages and banks price swept cash for everyday investors.
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