What the Schwab Cash Sweep Allegations Involve
When investors hold cash in Schwab brokerage accounts, that cash is automatically 'swept' into a default deposit vehicle. Schwab's default cash sweep is the Schwab Bank Savings Account, an in-house deposit product. Plaintiffs allege that Schwab's default sweep rate paid well below money market fund yields and was designed to generate net interest margin revenue for Schwab -- essentially using client cash as cheap funding while paying clients far less than available alternatives.
During 2022-2024 when the Federal Reserve raised interest rates rapidly, the yield gap between Schwab's default sweep accounts (paying under 0.5%) and available money market funds (paying 4-5%) became enormous. Plaintiffs argue Schwab had both a contractual and fiduciary obligation to place uninvested client cash in the best available vehicle rather than in an in-house product designed to maximize Schwab's own revenue.
Regulatory Background
The SEC has investigated robo-advisors and brokerage firms for similar cash sweep practices, resulting in enforcement actions. Schwab's robo-advisor platform Schwab Intelligent Portfolios previously reached a $187 million SEC settlement for failing to disclose that its portfolios held cash in ways that benefited Schwab's bank while reducing client returns.
The class action extends these theories to Schwab's general brokerage cash sweep practices, arguing that the same failure of disclosure and conflict of interest that triggered the robo-advisor settlement pervades Schwab's broader cash handling practices. Related: PayPal financial platform claims.
Who Qualifies
Current and former Schwab brokerage and IRA account holders who had uninvested cash swept into Schwab Bank accounts during the high-interest-rate period (approximately 2022-2024) while substantially better rates were available elsewhere may qualify. The difference between Schwab's sweep rate and available money market rates represents the potential damages.
Status 2026
Schwab cash sweep class action litigation is in active proceedings. No settlement has been announced. Schwab has contested the liability theories and argued its disclosures were adequate.
How to Get Legal Help
If you believe you qualify based on the eligibility criteria described above, the next step is a free consultation with an experienced attorney. Most plaintiff-side attorneys handling these cases work on contingency -- meaning you pay nothing unless your case results in a recovery. Bring any relevant documentation including receipts, correspondence, or evidence of the harm you experienced.
To stay current on case developments, claim deadlines, and settlement news, bookmark this page and subscribe to LawsuitWatch alerts. Coverage is updated as new court filings, settlement announcements, and eligibility changes are made public.
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Charles Schwab Class Action Lawsuit: Cash Sweep Account Claims: Frequently Asked Questions
Answers to the most common questions about this case and your legal options.
What is Schwab's cash sweep program?
Schwab automatically deposits uninvested client cash into a default account, primarily Schwab Bank. The lawsuit challenges whether the default account's rate adequately served clients.
How much did Schwab underpay on cash sweep?
During 2022-2024, the gap between Schwab's default sweep rate and money market fund yields was 3-4% annually, representing significant foregone interest on large cash balances.
Did Schwab settle the cash sweep lawsuit?
No settlement has been announced as of June 2026.
What should I do about my Schwab cash?
Review your cash position in Schwab accounts. You can manually direct cash to higher-yielding money market funds. The lawsuit is about default placement, not Schwab's full product offering.
Is this related to Schwab Intelligent Portfolios?
Schwab Intelligent Portfolios previously settled SEC charges for cash handling practices. The current class action involves similar theories applied to broader brokerage accounts.