A U.S. consumer watchdog saw an increase in complaints related to Robinhood last week. Some clients said they were unable to liquidate holdings and move to other brokerage firms.
The Federal Trade Commission received more than 100 Robinhood-related reports between January 24 and February 2, according to the agency. Seven such complaints were filed in the previous week. Agency data on other companies were not immediately available.
The past week has been chaotic for trading platforms as investors pile up in GameStop, AMC, and other soaring stocks. Robinhood has restricted trading in up to 50 names due to volatility and has since lifted those limits.
This move met with backlash from users and lawmakers who accused Robinhood of market manipulation and hedge fund managers who sold these stocks short. The startup said it didn’t make those decisions based on relationships with market makers and it needs to limit the buy side to meet capital requirements.
Many of the FTC complaints highlight these trade limits, but also show widespread frustration with Robinhood’s customer service. Over the past year, users have complained about a lack of support when something goes wrong, such as: B. Account hacks or issues with trading options.
Robinhood said it tripled its customer support team and hired hundreds of registered financial agents over the past year as the company’s user base grew over 13 million. The start-up has said in the past, “It can best serve customers by email,” but in certain cases it reaches customers by phone call.
“We are committed to improving the support we offer our customers. This is our top priority. We are actively recruiting and have made this work a priority,” a Robinhood spokesman told CNBC.
During the GameStop mayhem, some Robinhood customers said they couldn’t cash out their accounts to switch to other trading platforms. A Robinhood user told the FTC that the ability to “keep depositing funds is still active, but withdrawing money or trading stocks is completely blocked”.
“You’re sending your complaint nowhere with little hope that someone will get back to you. I just want the money I made so I can close my account and deal with this service,” wrote another Robinhood customer the Agency.
Another customer described a similar problem and said the only way to contact Robinhood customer support is by email. They said they “sent numerous emails (almost every day) and received no response”.
Tim Maloney, co-founder of ETF firm Roundhill Investments, told CNBC that his business is restricted and he cannot withdraw money from Robinhood. Maloney was also unable to contact Robinhood’s customer service.
Rayz Rayl, a former teacher and now a professional poker player, said he lost thousands of dollars trading GameStop last week. He told CNBC he was now having trouble signing in.
“I can’t even access my account and I may have a few thousand dollars left to transfer to my bank,” he said in a telephone interview. “I called Robinhood and they don’t answer the phone. I’ve emailed Robinhood many times and I get an email that says 1-3 business days – still nothing.”
Problems with ‘ACATS’
Robinhood and other brokerage firms use a service called the Automated Customer Account Transfer Service (ACATS). The system facilitates automatic transfer from one brokerage firm to another. Brokerage firms must respond to all inquiries by regulators within 24 hours and initiate a transfer.
However, this automated system doesn’t support cryptocurrency transfers or partial shares – two products that have caught on with younger investors. If traders hold either one in their portfolio, they could run into issues liquidating their Robinhood accounts, a person familiar with the process told CNBC.
Other users complained about connectivity issues on social media. Robinhood’s API provider, Plaid, which connects users’ bank accounts to apps like Robinhood and Venmo, told CNBC that there were no problems or downtime.
Despite the complaints, some reports show that hundreds of thousands of people signed up for Robinhood last week. JMP Securities estimates that 600,000 downloads were recorded last Friday alone. Robinhood venture capitalists told CNBC that new customer downloads far outweighed the wear and tear.
Robinhood has published several blog posts explaining its decision to stop trading on the buy side. In one, Jim Swartwout, President and COO of Robinhood Securities, outlines the challenges Robinhood faced in scaling demand.
“We grew quickly. And we encountered challenges at times as we adjusted to this moment,” said Swartwout, a former executive director of TD Ameritrade.
“We were rightly criticized for not delivering for our customers. We want our customers to buy the securities they want, in the quantities they want, and get the help they need when they want. We take our responsibility to our customers – and the rules and regulations that exist to protect them – seriously. “