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A Commonwealth Financial Network client has filed a class action lawsuit against the firm, claiming the interest rates it paid to customers in its sweep deposit accounts were “consistently low and untethered” compared to the market and the Federal Reserve’s benchmark rates. According to the lawsuit by Edward Weyler in Massachusetts federal court, other financial institutions (such as Vanguard) using sweep programs were paying clients “more than 335 times higher” interest rates than Commonwealth during a multi-year period in which federal rates skyrocketed. Weyler claimed that rather than structuring its sweep programs to benefit clients, “Commonwealth determined the programs’ interest rates based on a desire to increase its revenues at the expense of its customers” by taking most of the increased interest participating banks paid for customers’ swept cash in the form of fees.
Representatives from Commonwealth did not return a request for comment prior to publication. Welyer is based in Anchorage, Ky., and has been a Commonwealth customer since 2016, with an individual advisory account and two separate IRAs. Weyler claimed he’d been enrolled in two separate sweep programs in which his cash was placed into deposit accounts with participating banks.