WASHINGTON, D.C. – Sen. John Kennedy (R-La.) sent the following letter to SEC Chairman Jay Clayton, FDIC Chairman Jelena McWilliams and SIPC President Stephen Harbeck expressing his concerns about a financial services company, Robinhood, misleading its customers by marketing investment accounts as checking and savings accounts. Sens. Jack Reed (D-R.I.), Robert Menendez (D-N.J.), Mark Warner (D-Va.), Brain Schatz (D-Hawaii), Jerry Moran (R-Kan.) and Doug Jones (R-Ala.) joined Sen. Kennedy in sending this letter.
December 20, 2018
Dear Chairman Clayton, Chairman McWilliams and Mr. Harbeck:
We write today regarding the recent news that Robinhood plans to open checking and savings accounts now under the guise of “cash management.” Financial technology (fintech) firms like Robinhood serve a vital purpose and increase consumer choice, inclusion, and economic prosperity. Competition with traditional servicers like banks and credit unions can ultimately benefit consumers, but we must continue to maintain the integrity of our financial system as the digital revolution expands.
As you’re aware, on December 13th, Robinhood announced the availability of new checking and savings accounts with a three percent interest rate. Under a now deleted announcement, Robinhood wrote, “your cash in Robinhood is insured up to $250,000 by the Securities Investor Protection Corporation (SIPC). SIPC protects cash deposits in your account in the unlikely event that Robinhood fails.” We commend SIPC for quickly and publicly explaining these accounts would not be insured. Robinhood subsequently retracted its claims and rebranded the new service as “cash management.”
Cash management is an important existing service offered by brokers to address investor demand to better manage their money. We are concerned that rebranding Robinhood’s original announcement to cash management may simply be a way to circumvent regulatory scrutiny without offering full transparency to its customers. As of December 20, over 850,000 people have signed up for the waitlist for Robinhood’s new service, and some of these individuals may have signed up before Robinhood retracted its SIPC insurance claim and because they thought they would be getting “Robinhood Checking and Savings.” Marketing an investment account as a traditional checking or savings account can be misleading and confusing for consumers.
We applaud innovation that reduces barriers to consumer friendly financial products and challenges competitors to improve their business models. This is why Congress will continue to explore options that both encourage innovation, while protecting consumers and the safety and soundness of our financial system. In the meantime, we would appreciate an update on how the SEC, FDIC, and SIPC carefully monitor fintechs who, intentionally or not, blur financial products for competitive advantage. Indeed, robust competition should not come at the expense of customer clarity, and every effort should be made not to mislead customers. We thank you for your consideration and would appreciate a response by January 31, 2019.
Sincerely,
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John Kennedy Jack Reed
United States Senator United States Senator
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Robert Menendez Mark Warner
United States Senator United States Senator
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Brian Schatz Jerry Moran
United States Senator United States Senator
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Doug Jones
United States Senator
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