Sharnoa Computerized Machines yesterday filed a motion with the Tel Aviv District Court to recognize its lawsuit against banks Hapoalim, Leumi and Discount as an NIS 7 billion class action suit. Sharnoa accuses the three big banks of coordinating their interest rates, creating an effective cartel and impairing competition.

The company notes that the three banks have charged unitary interest rates on overdrafts in checking and other accounts over the past several years. Their credit allocation fees are also identical, says Sharnoa.

This price fixing meant that their price for credit was completely the same, Sharnoa says. As a result, competition was impaired or precluded, and the interest spread in the shekel checking-accounts sector widened relative to other sectors, generating tremendous profits for the banks at the expense of the public and the economy.

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The plaintiff, a designer of CNC milling machine controls, had bank accounts with Bank Hapoalim and Israel Discount Bank. However, it seeks to represent all of the three major banks' private and business clients, who paid identical interest rates. It estimates the damage to clients is at least 4 percent of the interest rates the banks charged, amounting to NIS 1.8 billion annually.

Copies of the suit went to the state attorney general, the antitrust authority commissioner and the supervisor of banks.

The plaintiffs explain that while banks theoretically can fix their own interest rates and have unlimited powers to do so, in practice the market is run under a compulsory arrangement. The result is a lack of competition in the market. "For some unclear reason, the antitrust authority chose to close its mouth in this matter, as did the supervisor of banks, leaving the big banks with the power to exploit average citizens" by fixing steep, uncontrolled interest rates, the plaintiffs charge.

The suit points to five different categories where the banks charged identical interest rates. The prime rate always stood at 1.5% above the Bank of Israel's prime rate. The risk premium was always 3%. Premiums on extensions beyond clients' credit frameworks were a uniform 3.5%. Interest on credit allocation - a quarterly fee taken in relation to the agreed upon size of credit - was 1.5%. And quarterly management fees were a uniform NIS 150 between 2003 and 2005.

"All of these were almost fully uniform and identical over the years because the defendants were a trio of clones," the suit claims. The plaintiffs call on the court to dismantle the economic restraints, which cause enormous damage to the public and lead to more expensive interest rates.

The 45-page suit includes documents and research data by the Bank of Israel and various committees, including the Bachar committee, allegedly attesting to the fact that over a long period of time, the banks fixed identical interest rates. The plaintiffs called the local banking sector one of the most concentrated in the world. "There's a price to this concentration, and the public has paid and continues to pay the price for years, as we learned from the Bachar report." Sharnoa is a privately-held designer of CNC milling machine controls.