Seven U.S. senators sent a letter to regulators over concerns that startup Robinhood and other fintech companies may be avoiding oversight and asking regulators to explain how they plan to police start-ups that are moving into banks’ territory.
The letter, sent to Securities and Exchange Commission Chairman Jay Clayton and the heads of the Securities Investor Protection Corporation and the Federal Deposit Insurance Corp., follows efforts by Robinhood to launch checking and savings accounts.
“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,” the senators wrote. “Robust competition should not come at the expense of customer clarity and every effort should be made not to mislead customers.”
On December 13, Robinhood announced it was offering offer no-fee checking and savings accounts with a 3% interest rate and no fees or account minimums. The company quickly retracted the announcement and said it was rebranding the product after pushback from regulators who said they had not been consulted.
Robinhood’s product has about 850,000 people on its waiting list, the senators said.
“As a licensed broker-dealer, we’re highly regulated and take clear communication very seriously,” Robinhood’s Co-Founders and Co-Chief Executive Officers Baiju Bhatt and Vlad Tenev wrote in a blog post on December 14. “We plan to work closely with regulators as we prepare to launch our cash management program, and we’re revamping our marketing materials, including the name.”
In their letter, senators said what Robinhood had initially called “checking and savings” accounts are actually cash management accounts, a type of investment account that is meant to hold cash used to buy and sell securities. “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,” they wrote.
Robinhood did not respond immediately to a request for comment on the senators’ letter.