New Poster Child for Class Action Abuse ; Is Charles Schwab Victim or Victimizer?

The Washington Times › November 30, 2011

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Summary

I've written about how the class action system benefits lawyers at the expense of class members. The poster child for the dysfunctional class action system was the Ford Explorer SUV class action settlement, a case in which plaintiffs' lawyers were awarded $25 million in attorneys' fees even though class members only received $74,000. Class counsel claimed that class members were receiving $500 million worth of $500 coupons toward the purchase of new Ford vehicles, but only 148 coupons were redeemed for a total value of $74,000. That's right, $25 million for the lawyers, although the class members actually received $74,000. But this holiday season brings to us what may be the gift of a new poster child for class action abuse.

In a nationwide class action, now awaiting approval in the U.S. District Court of Northern California, lawyers sued Charles Schwab & Co. on behalf of every person who anytime since 2005 had or has an individual retirement account (IRA) with Schwab. They alleged that the IRA agreement that Schwab has all of their customers sign contains language allowing Schwab to take money from a customer's IRA if a customer owes Schwab money. The lawyers claimed that this language permitted transactions to occur that are prohibited by the Internal Revenue Service (IRS) and thus, customers forfeited the tax- exempt status of their accounts. By the way, neither party contends that the IRS has ever made such a claim.