A bipartisan group of U.S. senators has expressed concerns that FinTech startup Robinhood is not being transparent about its cash management service.
After announcing a checking and savings product with 3 percent interest earlier this month, the company then removed any mention of the products from its site just one week later and instead rebranded it as a “cash management service.”
Now, according to Reuters, some U.S. Senators have sent a letter to regulators for information on how they “carefully monitor FinTechs who, intentionally or not, blur financial products for a competitive advantage.”
“Indeed, robust competition should not come at the expense of customer clarity, and every effort should be made not to mislead customers,” said the letter to the heads of the Securities and Exchange Commission, the Federal Deposit Insurance Corporation and the Securities Investor Protection Corp.
The letter was sent by Republican senators John Kennedy and Jerry Moran and Democratic senators Doug Jones, Brian Schatz, Jack Reed, Robert Menendez and Mark Warner.
In its initial announcement about its checking and savings service, Robinhood claimed that customer deposits would be insured by SIPC for up to $250,000. But one day later, the CEO of SIPC told reporters that he did not believe it would insure Robinhood’s accounts.
As a result, Robinhood changed the product’s name to “cash management” and removed any mention of SIPC. There was also no indication of whether or not the new service would be insured.
“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,” the letter stated. “As of December 20, over 850,000 people have signed up for the wait-list for Robinhood’s new service, and some of these individuals may have signed up before Robinhood retracted its SIPC insurance claim.”