PNC class action claims cash sweep program paid low interest rates

PNC sweep class action overview: 

• Who: A PNC Financial Services Group investor has sued the company.
• Why: The plaintiff alleges the company exploited its retirement account investors for its own financial gain.
• Where: The PNC class action was filed in a Pennsylvania federal court.
• How to get help: Consumers who hold or held cash balances or deposits in an investment account with a cash sweep feature that allegedly did not optimize returns may be eligible to take part in a class action lawsuit investigation.

A new class action lawsuit alleges that PNC exploited its retirement account investors for its own financial gain.

Plaintiff Ahmed M. Hegazy filed the class action complaint against PNC Financial Services Group, PNC Investments LLC and National Financial Services LLC on Dec. 4 in a Pennsylvania federal court alleging violations of state and federal consumer laws.

Hegazy alleges that the financial services companies breached the fiduciary duties owed to investors through the PNC Priority Bank Deposit Sweep Program. 

He says the program funneled uninvested cash from customer accounts into PNC Bank accounts that paid below-market interest rates, resulting in financial losses for investors.

According to the PNC sweep class action, PNC’s Retirement Account Customer Agreement explicitly states that the company acts as an “agent” and fiduciary for retirement account holders. However, Hegazy says PNC violated these obligations by selecting low-yield accounts held at its own affiliate, PNC Bank, instead of seeking competitive market rates for clients.

“Defendants breached their fiduciary duties when they placed their customers’ cash in low interest-bearing accounts held by their own affiliated bank and then pocketed the unpaid interest as additional profit,” the PNC sweep program complaint alleges.

PNC’s interest rates lagged behind market rates, lawsuit alleges

The class action lawsuit claims that from 2018 through March 2019 and again starting in March 2022, PNC’s interest rates on swept cash lagged far behind market rates. Competitors such as Fidelity Investments, R.W. Baird, Robinhood and Vanguard Investments allegedly provided annual percentage yields as high as 4.15% on similar accounts during the same periods. In contrast, PNC investors saw significantly lower returns, costing investors potentially thousands of dollars in lost interest, the PNC sweep class action states.

As a result, Hegazy is looking to represent all PNC retirement account holders who participated in the program and were subjected to the alleged unfair practices. 

He is suing for breach of fiduciary duty, breach of contract, breach of the implied covenant of good faith and fair dealing, and unjust enrichment. He seeks certification of the class action, damages in excess of $5 million, and a court order requiring PNC to pay interest rates that align with market standards moving forward.

Meanwhile, consumers recently filed several class action lawsuits against financial institutions claiming the companies’ cash sweep programs short-changed them. 

What do you think of the allegations in this PNC class action? Let us know in the comments. If you believe you were similarly harmed, see if you qualify to participate in a class action investigation.

The plaintiff is represented by Kenneth J. Grunfeld of Kopelowitz Ostrow P.A., Scott A. Edelsberg and Adam A. Schwartzbaum of Edelsberg Law P.A., and Andrew J. Shamis of Shamis & Gentile P.A.

The PNC class action is Ahmed Hegazy v. PNC Investments LLC, et al., Case No. 2:24-cv-01651 in the U.S. District Court for the Western District of Pennsylvania.

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