February 1, 2013
The Consumer Financial Protection Bureau announced Thursday it plans to investigate financial products marketed to college students through their schools. The products in question include cards used to access financial aid monies, school-affiliated bank accounts, and combination identification and debit cards, the Los Angeles Times reported.
"We have seen many colleges establish relationships with financial institutions to offer banking services to their students," Director Richard Cordray of the CFPB, a federal consumer watchdog agency, told The Huffington Post.
In contrast to credit cards, no laws exist governing the marketing of these other banking products to college students or the agreements made between financial firms and schools, The Chronicle of Higher Education explained.
"We want to determine whether students are getting a good deal," said Rohit Chopra, CFPB's student loan ombudsman. "This will inform how we work with schools and other policy makers to make sure this market is working well."
The federal agency wants to hear from the public, students, families, educators and banks about their experiences with these products. It wants feedback on what student information schools are sharing with banks, how campus marketing deals are negotiated, how the financial offerings are marketed to students, what fees students are charged to use these offerings, and how often students do use them.
The CFPB plans to accept feedback via email at [email protected] through March 18. It then can use those comments when working with school officials on ways to help students manage their money well during college. The bureau also intends to publish a summary of its findings.
Christine Lindstrom, higher education program director at the U.S. Public Interest Research Group, approves of CPFB's inquiry, The Chronicle noted. She said financial institutions often charge "high and unfair" debit card fees.
Her organization published "The Campus Debit Card Trap" in 2012, which warned students about the often lofty fees associated with school-affiliated bank accounts and debit cards, including costs for transferring funds and checking balances. The Huffington Post noted that students frequently use their financial aid to pay those fees.
Last year, the Federal Deposit Insurance Corporation ordered Higher One Inc., which provides financial products to campuses, and The Bancorp Bank to pay approximately $11 million in restitution for their alleged unfair and deceptive practices involving college students. Afterward, CFPB issued an advisory, encouraging students to opt for direct deposit of financial aid rather than using school debit cards.
"We need greater transparency and best practices when banks and financial firms are allowed to manage billions of dollars in financial aid," Lindstrom told The Chronicle, "so both students and taxpayers are protected."
Compiled by Doresa Banning
"CFPB Launching Investigation Of College Debit Cards, Financial Products Marketed To Students," huffingtonpost.com, January 31, 2013, Tyler Kingkade
"Consumer bureau to probe more college financial products," latimes.com, January 31, 2013, E. Scott Reckard
"Consumer-Protection Bureau Opens Inquiry Into Student Financial Products," chronicle.com, January 31, 2013, Allie Bidwell
"Your two cents on student cards and bank accounts," consumerfinance.gov, January 31, 2013, Rohit Chopra and Patrick Campbell