How a US Couple Recovered NIS 41,800 in Israeli Bank Fees

Result: NIS 41,800 of undisclosed account fees and conversion differentials refunded, online access restored and the account converted to a foreign currency account · Timeline: 11 months · Challenge: Four years of Hebrew only fee notices · Authority: Banking Supervision Department at the Bank of Israel · Financial Impact: NIS 41,800 refunded plus about NIS 9,000 a year saved

Background

A retired couple in Scottsdale, Arizona have owned a two bedroom apartment in the Katamon district of Jerusalem since 2009. It has been let continuously since 2014, and the rent, currently NIS 8,900 a month, lands in an Israeli account they opened when they bought the flat. Neither of them reads Hebrew. Both are US citizens and neither has ever been an Israeli resident.

In 2021 the bank reclassified their account. The husband had assumed the change was administrative. What followed it was a monthly account maintenance charge at the non-resident tariff, a fee on each incoming rent transfer, and a conversion spread applied every time they moved money to their US account. Every notice of the change had arrived in Hebrew, by post to the Jerusalem address of the apartment rather than to Arizona, and by email to an address the wife had stopped using in 2018. They noticed in late 2024, when the husband asked the branch to open a foreign currency account (patach) to stop the conversions and received no answer for four months. When he then failed a telephone identification check, the bank blocked their online access, and they could no longer see the statements they were trying to query.

The Challenge

The couple wanted two things that Israeli banking law treats very differently. Getting the account fixed is what the regulator does. Getting the money back is not.

Section 5 of the Banking (Service to Customer) Law 5741-1981 requires proper disclosure, and Section 4 prohibits a bank from exploiting a customer's inexperience or unfamiliarity with a language to bring about a transaction on unreasonable terms. That second provision reads almost as though it were drafted with a foreign account holder in mind, and it was the centre of the complaint: four years of tariff changes communicated only in Hebrew to addresses the bank knew were not being used. Section 2(b) was the answer to the patach account request, because attaching conditions nobody could satisfy is treated as a refusal in the same way as saying no.

The escalation route is fixed and runs in order. Every Israeli banking corporation must appoint a public enquiries representative under Proper Conduct of Banking Business Directive 308A, and that officer must reply to a customer complaint within 45 days, extendable by a further 15 days to a maximum of 60 on written notice. Only then does the Public Enquiries Unit of the Banking Supervision Department at the Bank of Israel come into play, under Section 16 of the same Law. Section 16(a) obliges the Supervisor to investigate enquiries that appear to have substance; Section 16(b) provides that where the complaint is found justified, notice goes to both sides setting out the findings and the manner in which the defect is to be rectified.

The trap sits in Section 16(d). The Supervisor's decision grants the complainant no right or relief in court that he did not already have, and submitting a complaint does not extend any limitation period. A fee dispute sits in the ordinary seven year window under the Prescription Law 5718-1958, and the oldest charges here dated from 2021. Every month the file spent with the ombudsman and then with the Supervisor was burning that window rather than pausing it.

In Practice: The bank's own ombudsman comes first and must reply within 45 days under Proper Conduct of Banking Business Directive 308A, extendable by 15 days to a maximum of 60 on written notice. Then the Public Enquiries Unit of the Banking Supervision Department at the Bank of Israel investigates under Section 16(a) of the Banking (Service to Customer) Law 5741-1981, free of charge and with no representation required, and a finding under Section 16(b) directs the bank how to rectify the defect. A bank that fails to correct the deficiency faces a financial sanction of NIS 250,000 under Section 11A(a), with the heavier tiers in Sections 11A(b) and 11A(c) running to NIS 750,000 and NIS 1,500,000.

What We Did

The first step was standing and documents, because a complaint filed by someone the Unit does not accept as the customer is simply closed. Both spouses signed a specific power of attorney before a notary in Scottsdale, apostilled by the Arizona Secretary of State, and we had the signatures authenticated in Israel at NIS 197 for the first signatory and NIS 77 for the second under the Notaries Regulations (Service Fees) 5738-1978.

Restoring access came before arguing about money. We wrote to the branch and to the bank's public enquiries representative on the same day, asking for online access to be reinstated against the apostilled power of attorney rather than a telephone identification the couple could not pass from Arizona. Access came back in nineteen days, which gave us four years of statements to work from.

The ombudsman submission went in with a reconstruction rather than a narrative: a table of every charge from March 2021 to December 2024, separated into account maintenance at the non-resident tariff, per transfer fees, and conversion differentials measured against the Bank of Israel representative rate on each transfer date. That last column is what turned a complaint about service into a number. The bank took the 15 day extension and replied at day 58, offering NIS 4,300 as a gesture and denying any disclosure failure.

We then filed with the Public Enquiries Unit under Section 16(a), in Hebrew, with the statements and the couple's correspondence translated. In parallel, and this is the step non-residents usually skip, we issued a civil claim in the Jerusalem Magistrates Court. Section 15 of the Law treats damage caused by an offence under it as damage claimable under the Civil Wrongs Ordinance, and the claim exists to stop the seven year clock that Section 16(d)(2) keeps running. It was filed and then held, not pursued.

In Practice: Section 16(d)(1) means the Supervisor's finding gives you no right in court that you did not already have, and Section 16(d)(2) means the complaint does not extend any limitation period, so the seven year window under the Prescription Law 5718-1958 keeps running through the whole process. Where the loss is quantifiable, the money route is Section 15, which treats damage from an offence under the Law as claimable under the Civil Wrongs Ordinance. Under Section 12(a)(2) the Supervisor of Banks may accept a written undertaking from the bank to compensate the customer, which is negotiated rather than ordered.

The Outcome

The Supervisor found the complaint justified. The finding under Section 16(b) held that the tariff change had not been properly disclosed to customers the bank knew to be resident abroad, and directed the bank to correct its notification practice for non-resident account holders and to open the foreign currency account that had been requested and never actioned. On the money, the bank gave a written undertaking under Section 12(a)(2) and refunded NIS 41,800: NIS 26,400 of account maintenance and transfer fees, and NIS 15,400 of conversion differentials measured against the representative rate. The civil claim was withdrawn on payment.

Eleven months passed from the first letter to the branch to the refund. The couple now hold a shekel account and a foreign currency account, and their rent converts once, at a rate they see, rather than at each transfer. On current rent that saves them roughly NIS 9,000 a year. Their US position was straightforward but needed flagging to their accountant, since both accounts continue to be reported on FinCEN Form 114 and the refund arrived in a year in which the maximum account value moved.

Key Takeaways

1. Go to the bank's ombudsman before the Bank of Israel. Directive 308A gives that officer 45 days, extendable to 60, and the Public Enquiries Unit will ask whether you exhausted it. Skipping the step costs you months.
2. Reconstruct the loss as a table, not a grievance. Separating maintenance fees, transfer fees and conversion differentials against the representative rate is what converted this from a service complaint into a NIS 41,800 undertaking.
3. File the court claim in parallel and hold it. Section 16(d)(2) keeps the seven year limitation clock running while the regulator works, and a fee dispute that is four years old when you start has less runway than it looks.
4. Fix access before arguing about money. An apostilled power of attorney reinstated online access in nineteen days and produced the statements the whole complaint rested on.
5. Hebrew only notices to an Israeli address are the argument, not the background. Section 4 and Section 5 are aimed precisely at a customer's unfamiliarity with the language, which is why the disclosure failure carried the finding. The full escalation route is set out in our answer on complaining about an Israeli bank from abroad.

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Facing a Similar Situation?

If your Israeli account has been reclassified, frozen, or quietly repriced while you live abroad, the escalation route works entirely on paper and costs nothing, but it does not stop the limitation clock and it does not award you money. Our guide on opening an Israeli bank account as a non-resident explains what a branch is entitled to ask for and when its conditions become a refusal.

Contact us for a confidential consultation about your Israeli legal matter.