Exchangeable alkali and alkaline earth metal cations such as, Na+, K+ and Ca2+, have been found to reduce conversion and product quality during liquefaction of a Wyodak subbituminous coal and a North Dakota lignite. The adverse effect, which increases in the order Na+ < K+ << Ca2+, is probably due to these cations inhibiting hydrogen transfer from the donor solvent or H-2 gas to the coal free radicals, thus promoting retrogressive reactions. The deleterious effect of metal cations may be significantly reduced by preswelling coals prior to liquefaction. Preswelling enhances both the liquefaction yield and product quality. The magnitude of the enhancement is determined by the type of cations present on the coal surface. We have also found that the catalytic activity of iron deposited on a lignite by ion exchange is far superior to the same iron species deposited by slurry mixing.