Charles Schwab Corporation responds to Public Citizen petition
Nobody should have to sacrifice their rights in order to save for retirement.
On Tuesday, Public Citizen launched its “Stand Up to Chuck” campaign calling on Charles Schwab & Co., Inc., a well-known investment advisor holding more than $2 trillion in assets for millions of investors, to drop the class-action ban and forced arbitration clause from its terms.
On Twitter, Schwab responded:
The link that @CharlesSchwab shared was to a boilerplate statement on how it’s legal for the corporation to ban class actions because of the Supreme Court’s horrendous ruling (almost exactly two years ago) in AT&T Mobility v. Concepcion.
The statement also references Schwab’s dispute with the Financial Industry Regulatory Authority (FINRA). FINRA, a banking industry self-regulatory body, has rules to prevent brokerage firms like Schwab from banning class actions. By inserting a class-action ban into its terms, Schwab violated those rules. FINRA filed a complaint against Schwab to order it to remove the class-action ban. Unfortunately, FINRA lost the dispute against Schwab, but an appeal is pending on the case.
Regardless of what happens with the FINRA case, the Securities and Exchange Commission should step in and require Schwab and other brokerage firms to drop the predatory language from their terms.
Here are some comments from the more than 15,000 activists who have joined Public Citizen in standing up to “Chuck” by calling on Charles Schwab to drop the class-action ban and forced arbitration clause from its terms:
Your forced arbitration, and your class-action bans now make me want to stop doing business with you. I’ve been your client since 1992 but I don’t like being treated like a peasant. Get rid of those restrictions or I will get rid of you. (Activist and investor from California)
You just lost a lot of credibility in my opinion. You were on my short list of investment purveyors, but you are easily removed if this is your take. With the track record financial institutions have, this is not a positive step, Chuck. (Activist and investor from New Hampshire)
You can’t take my rights if you want to invest MY money. Go find people who don’t care if you want but don’t try to limit my rights. (Activist and investor from Texas)
When even FINRA, a Wall Street self-regulatory agency not particularly friendly to consumers, says it violates its own rules and is wrong to ban class action suits by investors, you know it’s VERY wrong to do so. (Activist and investor from New Jersey)
This clause is an outrage. In the United States, it has always been a founding principle that persons can take a grievance to the judicial system. It seems that the attacks on our democracy are now coming from some very prominent institutions. Forced arbitration clauses are an egregious assault on our basic rights. (Activist and investor from Illinois)
The denial of my rights (as a Charles Schwab client of many years) by denying me access to litigation or class-action participation may force me to seek a less hostile broker. That would be a pity and a hardship. (Activist and investor from Connecticut)
Please remove the forced arbitration clause and the ban on consumer class actions terms for investors. I plan to close my Charles Schwab account if these provisions are not removed immediately. And I’m sending this to others of my friends and family who are Charles Schwab investors and may not know about these stealth provisions. (Activist and investor from Texas)
My husband and I both have investments in your fund, on advice from our financial managers, however we do have the option of adjusting our portfolios. I am seriously disturbed by the stipulations mentioned, which deny my right as a citizen to ask for redress in a court as a class action participant should I feel the action to be appropriate in case of wide spread abuse. Laws should protect the people as well as the corporations. (Activist and investor from Montana)
I’ve had my investment and banking accounts with Schwab for years. I’ve recommended you to many people. I never imagined you were the perfect company, but this is cheesy and dishonorable. If you don’t remove these conditions on your own–before the appeals hearing–then I’ll be moving my accounts to another brokerage. And that will really make me mad because it’ll take my time and energy to research and then make the change. And believe you me – I’ll blame you, and will spread that word just as freely as I’ve recommended you. Why would you abuse your clients’ trust this way? I hope it’s just some very bad legal advice and the real Charles Schwab will stand up now. (Oregon)
Stand up to Chuck: Add your name to the petition to Charles Schwab.
Rick Claypool is online director for Public Citizen’s Congress Watch division. Follow him on Twitter at @RickClaypool.