Bankers ‘Speak Out’ Over Robinhood’s checking and savings Accounts
Robinhood set in motion its 3% interest ‘Robinhood checking and savings accounts‘ last week. U.S banking organisations considering 3% which is over the average rate offered by conventional banks coupled with differentials in the insurance that protects investors in Robinhood’s new products have started to raise their concerns.
The Robinhood Checking and Savings accounts at first look like conventional savings accounts, with higher returns. However, savings accounts are normally protected by the Federal Deposit Insurance Corporation (FDIC). Robinhood’s accounts are instead protected by the Securities Investor Protection Corporation (SIPC).
The senior regulatory counsel for the Independent Community Bankers of America (ICBA), Chris Cole, told American Banker yesterday that Robinhood’s use of the terms banking, checking, and saving could be “deceptive.”
He said: “This is supposed to be a brokerage account, but they’re running around making it look like a banking account.”
Unlike FDIC coverage, SIPC coverage only guarantees an account holders balance to the value of their funds on the day of any insolvency. Cole went on to reveal that: “Robinhood does not sufficiently explain the difference between SIPC protection and FDIC insurance.”
Stephen Harbeck, CEO of the SIPC, told the media that he was not consulted, and that he has already filed a complaint with the U.S Securities and Exchange Commission (SEC) over the matter. Harbeck told CNBC: “We want to make sure that investors know there’s some risk there.”
Robinhood is yet to respond to the points raised.
Sarah Grano, a spokesperson for the American Bankers Association told American Banker in an email that:
“We appreciate any effort by regulators to clarify when deposits are fully insured and when they are not, and the need to respond quickly to misrepresentations.”