By Oren Giskan, Esq.
Have you been following the FINRA v Charles Schwab (“Schwab”) battle? Schwab is a stock brokerage that recently inserted a ban on class actions in its customer agreement. FINRA, the Financial Industry Regulatory Authority, Inc., who regulates brokerages such as Schwab didn’t like it so it sued Schwab.
The Hearing Panel, which is part of FINRA, sided with Schwab and upheld the ban on class actions. This means that Schwab customers cannot band together in a class action and seek redress for any unlawful or deceptive practices that Schwab may engage in. (Keep in mind that Schwab was caught once before and paid over $200 million to settle a class action lawsuit alleging it marketed risky securities as conservative investments.) In other words, Schwab customers must individually take on Schwab no matter how many Schwab customers are affected by the same practice.
This is a good an opportunity for consumers to stand up and say enough. Schwab customers who understand that the class action ban is a “get out of jail free” card for Schwab and insulates Schwab from liability should take their business elsewhere. If enough consumers stand up to these egregious clauses, perhaps businesses will think twice before trying to insulate themselves from liability by banning class actions in their fine print.