The Consumer Bankers Association (CBA) said federal financial regulators need to ensure that consumers know the differences in protections between regulated banks and non-bank financial institutions.
In a letter to the Federal Deposit Insurance Corporation, Federal Reserve Board, Federal Trade Commission, Office of the Comptroller of the Currency, and Securities and Exchange Commission, CBA President and CEO Richard Hunt said well-regulated banks have safeguards like FDIC insurance and consumer protections in place. Non-bank financial institutions are not subject to the same standards, which can cause problems for consumers who are not aware of the differences.
“Just last week, Robinhood Financial, a large non-bank financial service company, introduced its take on the traditional bank account,” Hunt wrote. “The new offering, Robinhood Checking & Savings, promised a 3 percent interest rate, a rate that is difficult to match by a regulated depository. Robinhood pitched the service to its roughly six million customers as being akin to a traditional checking or savings account – it would have come with a debit card that offered access to ATMs. Also, neither of the products needed to have a minimum monthly balance.”
Hunt stated that presenting an investment account as a checking account should raise concerns for consumers.
“We see Robinhood as a prime example of blurring these lines, and we encourage your respective agencies to help ensure consumers are not harmed by products that are misleading and not clearly understood,” Hunt wrote.