Basic cyber security says that passwords should be encrypted and hashed, so that even the company storing them doesn’t know what the password is. (When you log in, the site performs the same encrypting and hashing steps and compares the results) Otherwise if they are hacked, the attackers get access to all the passwords.
I’ve noticed a few companies ask for specific characters of my password to prove who I am (eg enter the 2nd and 9th character)
Is there any secure way that this could be happening? Or are the companies storing my password in plain text?
I would assume they have the whole password in plain text, then. Not much you can do about it, just make sure you’re not re-using any part of that password for other services. And if you are, then you should start changing them all to something unique, ideally with a password manager like Keepass or BitWarden. This is a good habit anyway, because you can never really know how companies are handling their IT security.