"My understanding is that if you have a margin account the securities firm can lend out any of positions regardless if you have a margin loan or not."

Only if you give consent!

Nope. The original quoted part is right.

A quick google search comes up with this:
"Your broker also cannot lend out the securities you hold in a cash account without your permission. In a margin account, your broker may lend your shares to short sellers or hedge funds without notifying you."


Read the margin agreement of your broker. Yes, I know, nobody ever reads them.

Here is what is in Etrade's:
"You understand and agree that all Collateral may be pledged and repledged and hypothecated and rehypothecated or otherwise used by Morgan Stanley."
...
"In the event that Morgan Stanley pledges, repledges, hypothecates, or rehypothecates any Collateral, you understand and agree that Morgan Stanley may receive and retain certain benefits to which you will not be entitled. "


What you are talking about is "Fully Paid Lending." That's when you have a non-margin account (including an IRA). The broker will only do that when there are no positions in margin accounts that they can lend out, but somebody still wants to short it. Obviously the brokers will tap margin accounts first, since they get to keep ALL the money. Etrade gives you 1/2 the money they get for lending the shares. Fidelity gives you whatever they want to.

I had an IRA in the FPL program, but stopped it after a while, since the money I earned was trivial.