Schwab Removes Class Action Waiver from Client Agreements

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Seemingly bucking the trend of corporations fighting to force consumers into individual arbitration to avoid class actions, Charles Schwab Corp., the prominent “discount broker,” has decided to revise its client account agreements to eliminate a provision that had reliably allowed Schwab to prevent clients from filing class actions against it, by requiring clients to take any disputes to individual arbitration.

However, rather than an altruistic gesture on Schwab’s part, removal of the class action waiver comes as the result of a complex set of events, whereby a FINRA (Financial Industry Regulatory Authority) panel decided to permit such waivers, but the decision was later opposed by the larger body of the FINRA itself. Thus, rather than renouncing arbitration and class action waivers altogether, it appears that Schwab is temporarily opting out while the FINRA sorts out its ultimate policy decision. FINRA is the organization that has conducted the bulk of arbitrations between Schwab and its clients.