Charles Schwab & Co. review: Unauthorized margin loan

I’m not a large investor but I am active. I was not happy with the merger of TD Ameritrade and Schwab because despite promises many features and the way they present information was lost. Little details and seemingly simply things that added up to less information, less candid transactions and less obvious details.

I recently sold some positions (a large dollar amount for me) that I needed for some thing else. I waited two days after the sale and initiated a transfer to my bank, without complaint or warning the transfer went through (a day earlier than I asked for it). that detail is important.

Today, checking my emails I see an email from Schwab indicating they have taken out a margin loan of nearly the same amount of my transfer. Some of you can already guess what happened as I did immediately. I logged in, and Sur enough Schwab did a margin loan and transferred the money a day early (seemingly so they could charge interest and transaction fees).

I called and after all the authentication questions asked why a margin loan was made without my authorization. The well meaning rep explained that the funds were not actually really available so a loan was taken (again without asking me) to make the bank transfer. I was told I could not start making payments or pay it off since my funds had cleared today.

I complained that with TD A the site would first give me a warning if I tried to transfer funds before they have cleared and offer a suggested date of when the funds should clear. Because I had the funds on hand I was offered a loan if I wanted to get the funds earlier to transfer seeing that I was clearly good for it and that if I let the system pay it back when funds cleared there would be no fees or charges.

With Schwab none of this happened, no warning that the funds were not available, no warning that if funds were not there a loan would be taken without warning. No request to proceed. Just the typical screen indicting my transfer request was made.

If I had not called I would find myself making payments and accruing fees and I would not have signed or approved anything. This is not professionalism, this is unethical. They can say it’s legal or policy or buried in the terms but that is not really justification. The Schwab system seems designed to obscure and deceive, it might me legal but that does not make it ethical or good customer service.