Lawsuit Says Leumi Keeps Blacklist of Troublesome Clients

Class action claims that blacklisted customers were automatically rejected for loans, regardless of their current financial situation.

People walk past a branch of Bank Leumi in Tel Aviv in this February 18, 2009 file photo.
Reuters

A class action being brought against Bank Leumi accuses the bank, and by implication Israel’s other lenders as well, of maintaining a blacklist of clients who have sued the bank or been sued by it.

The suit, which is being brought by Naor Yair Maman Law Firm, claims that blacklisted customers, who are identified in Leumi’s databases with an asterisk, are automatically rejected for loans.

TheMarker has learned that at least one other bank has a similar practice, suggesting that additional Israeli lenders might follow the same practice.

The suit relates the story of an unidentified Leumi customer who sued the bank a decade or so ago. The suit ended in a settlement, under which Leumi paid the plaintiff the majority of the money he had sought.

But 10 years later, the client, who owns a small business, applied for a loan and was turned down.

An examination of the application indicated that the client met the criteria for getting the loan, but was rejected for having sued the bank years earlier and appeared on a blacklist of others who launched suits in the past.

The plaintiffs assert that once someone lands on Leumi’s blacklist they are there forever, even though criminal law allows the erasure of a criminal record after a certain number of years.

Moreover, the suit argues, not the names on the alleged blacklist, the criteria for being put on it nor its duration — nor, for that matter, its existence, have ever been made public.

The small business owner who was rejected by Leumi is also on the blacklist of a different bank, according to information obtained by TheMarker. He was blacklisted by the second bank after it sued him, and years later the bank has continued to turn down his loan applications.

Leumi is asking the court to reject the class action and it denies the existence of any blacklists. It argues that any advisory note attached to the plaintiff’s name complies with Bank of Israel rules requiring banks to maintain records on any customer with a problematic credit history.

Leumi said such an advisory note in a client’s file is part of the array of data that is used to create a credit rating for any potential borrower.

Leumi stressed that credit ratings are dynamic and that anyone who remains an active client, with a checking account or credit card for instance, should be able to improve his or her rating over time. Past credit problems will eventually be overlooked.

A client’s credit rating, however, stands to remain poor if after a problem with a loan he or she leaves the bank and stops doing business with it. The client then has no history with the bank that can be used to improve the rating.

The Bank of Israel declined to respond to questions by TheMarker on the possibility that blacklists exist, saying it doesn’t make public comments involving pending lawsuits.