A bank usually is one of the safest places to put your money in and to be certain that the interest rates promised to you will be kept on delivering the same, right? That’s pretty much what a lot of retirement account holders thought with the PNC Bank. But it turns out, or at least the allegations say that there was something sketchy going on behind the scenes. That’s pretty much why we’re talking about this PNC Retirement Account Cash Sweep Lawsuit in the first place.
How PNC’s Cash Sweep Program Works
If you get into the details of it all, you’ll find out that in retirement and brokerage accounts, it’s normal for some money to be left uninvested. Going a bit in-depth, see, to deal with this idle cash, the majority of firms have a cash sweep program. And? Then, usually, the program automatically places the unused funds in an interest-bearing account until the money is invested again.
And just like that, yup, PNC has a sweep system called the Priority Bank Deposit Sweep Program. But as per the details of this lawsuit and what is being said out there, the bank, instead of allowing customers to earn competitive interest by placing funds in a third-party bank, routed all cash that was swept to its own bank accounts. It is further alleged that these accounts paid interest rates that were significantly lower than what was available in the market.
What the Lawsuit Claims
Actually, there are three main allegations being made right now against PNC. And to start strong, see, firstly, it points out that PNC engaged in a breach of fiduciary duty. To put it simply, the bank was supposed to put its customers’ interests first, but it is alleged that it did not do so.
Secondly, the suit tries to establish that PNC breached its contracts with account holders by not giving fair returns on the money deposited in the sweep accounts. That’s it? Nah, see, the complaint also charges malicious intent by saying that the customers were not properly notified of how their funds were handled. And then, finally, the suit contains a charge of unjust enrichment, like PNC allegedly made profits that should have been passed on to its customers.
Timeline and Interest Rate Gap
As per the court papers, these operations are accused to have taken place between 2018 and March 2019 and again from March 2022. In such time frames, PNC’s sweep accounts were allegedly credited with interest rates that were far below the market averages, which sounds and appears kinda sketchy.
While other financial institutions were giving yields up to 4.15%, PNC clients got significantly lower profits. This discrepancy, if extended over a longer period, might have turned into considerable forgone earnings for retirement savers.
Legal Case Details
Coming back to the lawsuit itself, see, to be exact here, the lawsuit, Ahmed Hegazy v. PNC Investments LLC, is filed in the U.S. District Court for the Western District of Pennsylvania, case number 2:24-cv-01651.
Within this title case, the plaintiff, the one having all those allegations, has filed a motion for class action certification to enable the affected account holders to become members of the case. Right now, so far we know that the complaint is demanding over $5 million in damages and also seeking a court order requiring PNC to offer interest rates that are in line with the prevailing market conditions.
Current Status and What Investors Should Know
The suit continues to be a matter for the nose courts. No decisions have yet been made, and the legal proceedings will take their course through the standard steps, such as the review of evidence and maybe the discussion of settlement options. So it is going to be super interesting as this case moves forward, that’s what we’re certain of.
