Merrill Edge, a prominent division of Bank of America's consumer banking sector, is currently embroiled in a significant class action lawsuit. The lawsuit, initiated by a client from St. Clair Shores, Michigan, alleges that Merrill Edge has not provided reasonable interest rates on cash balances in retirement accounts.
The core of the lawsuit revolves around a breach of contract claim. According to the plaintiff, Merrill Edge did not adjust its interest rates in accordance with prevailing market trends from March 2022 through 2023. This allegation was detailed in a complaint filed by investor Margaret McCrary in the Southern District of New York.
McCrary, who has been a Merrill Edge individual retirement account holder since October 2020, seeks to represent a broader group of investors holding similar accounts post-March 2022. This period is significant as it coincides with the Federal Reserve's decision to increase the target federal funds rate.
The lawsuit demands compensation for the discrepancy between the market interest rates and the rates actually paid on these retirement cash accounts. Furthermore, it seeks injunctive relief to prevent Merrill from continuing its practice of offering what is claimed to be unreasonably low interest rates. The suit also includes a request for coverage of attorney and filing fees.
According to the filed complaint, Merrill Edge's interest rate offerings were strikingly low. Accounts holding less than $1 million received a mere 0.01% annual interest, a figure starkly contrasting with the nearly 5.4% market rate as of November 2023. The complaint highlights a marginal improvement for clients with $1 million to $10 million, who received a 0.30% interest rate, and a slightly better rate of 1.06% for those with over $10 million.
In a move reflective of her dissatisfaction, McCrary transferred her account to Fidelity Investments in March 2023 after Merrill Edge did not increase its rates. Notably, Fidelity was offering as much as 2.72% on swept cash accounts in August, irrespective of account size. Robert C. Finkel of Wolf Popper LLP, representing McCrary, sharply criticized Merrill Edge's practices. He highlighted the significant gap between the 0.01% interest rate offered by Merrill and the 5.33% federal funds rate, deeming it a blatant violation of the contractual obligation to provide a reasonable rate.
This lawsuit is not an isolated incident for Merrill Edge. Finkel is also representing Sarah Valelly in a related 2019 class action suit against Merrill. Valelly's case, based on allegations of unjust enrichment and deceptive trade practices, accuses Merrill of inadequately disclosing sweep options and improperly transferring cash from brokerage accounts without explicit consent. After an initial dismissal in 2020, Valelly refiled her complaint in February 2021.
In response to these legal challenges, a Merrill spokesperson emphasized the company's track record of successfully defending similar claims over the past four years. The spokesperson reiterated Merrill's commitment to defending itself against these ongoing allegations.
