Schwab gives up on class action waiver

Posted on: June 11th, 2013 by Steve Larson
Share

Class Actions Practice Area urlCharles Schwab Corp. (SCHW) has reversed course on a requirement that customers must waive their right to participate in class action lawsuits against the company.

On its website, the San Francisco discount brokerage said it’s “modifying its account agreements to eliminate the existing class action lawsuit waiver for disputes” related to events that occur on or after May 15 and “for the foreseeable future.”

Schwab initially added the class action waiver provision in September 2011. The provision requires that all disputes between Schwab and its customers be hashed out in arbitration.

In early 2012, the enforcement division for the Financial Industry Regulatory Authority (FINRA), brought a complaint against Schwab arguing that the regulator’s rules prohibit the use of class action waivers by brokerage and investment banking firms.

In February, a hearing panel for FINRA dismissed part of a complaint against the company, saying it couldn’t prevent Schwab from requiring its customers to waive those rights. FINRA has appealed the decision.

In the statement Thursday, Schwab said “while the company believes that dispute resolution is best handled via FINRA arbitration, we have chosen to voluntarily remove the waiver going forward until the issue is resolved by the appropriate regulatory and/or court decisions.”

The company said that to ensure small investors have access to “pursue any claims they consider appropriate within the arbitration forum available to them,” it would continue its existing policy of paying for the arbitration fees of any investor electing to pursue an arbitration claim under $25,000 against the company.