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Washington, DC — Today, the Consumer Financial Protection Bureau (CFPB) called on financial institutions to publicly disclose all of their card agreements with colleges and universities. Currently, institutions only need to disclose agreements regarding credit cards, but not debit, checking, or prepaid cards.
The CFPB also released their annual report on the campus credit card marketplace, which found that preferred lender and other agreements between colleges and financial institutions have decreased since the passage of the CARD Act in 2008. Specifically, college and credit card company agreements have fallen by 41%, and, as a whole, in 2012 colleges were given 40% less money by credit card companies than in 2009.
“As a result of strong public disclosure and consumer protection rules, consumers are being made aware of the tricks and traps that were layered into credit cards marketed on campus,” noted Ethan Senack, higher education associate for the U.S. Public Interest Research Group, a consumer organization with student members. “But at the same time, financial institutions are using the lack of disclosure requirements around debit and checking cards to keep students in the dark."
“We support the CFPB’s call for financial institutions to publicly disclose all agreements they make with colleges and universities. Students have a right to know the details.”
While the use of campus credit cards dwindles, two in five students now carry a debit card issued through their campus.
The U.S. Department of Education recently announced a new rule-making process to re-evaluate how these debit cards work on campus, while the CFPB launched an investigation into the campus banking marketplace. At a CFPB forum on campus banking this September, several student representatives spoke out against the campus debit card trap.
Meghan Johnson, a sophomore at Iowa State University, said that “Several issues continue to bother me about the USBank debit/checking cards living on our student IDs. I think that we need more options offered to us as college students at Iowa State. When there is only one checking/debit option, then we are captive to whatever fees are pushed on to us. If there were more banking options available, then we can shop around and find the account with the fees and other features we want.”
Bill Campbell, a senior at Western Washington University, summed up his remarks this way: “The company Higher One and our administration illicitly ushered in a new system for financial aid refunds on our campus. The system was laden with fees and created an undue burden for our students. Through our referendum process the students at Western voted against Higher one and negotiated a re-evaluation of the contract. Students do have power and we will not stand being taken advantage of".
Mario Parker-Milligan, the legislative director for the Oregon Student Association and the former student body president at Lane Community College, said: “The Higher One contract at LCC is increasing student debt there… Higher One helps itself to its fees through our loan dollars. And the college is letting that happen.”
Some cards are preloaded with student’s financial aid, and some are linked up to their student identification cards. Students with these accounts are hit with higher fees than what they would pay at a local bank, while the neediest students receiving the most financial aid are targeted with fees that aren’t fully disclosed and are hard to avoid. Banks and financial firms make millions and millions in revenue each year from these fees. A U.S. PIRG report issued in 2012 documented the extent of the problems in the debit card marketplace and an ABC investigation found that TCF Bank hits students with a $37 hidden fee at the University of Minnesota – while the university was given $34 for each new student customer.
U.S. PIRG supports the CFPB’s call to bring campus debit agreements out of the shadows, and calls on Congress and federal regulators to enact strong consumer protections for student debit card-holders. Those include banning fees for student access to federal financial aid, encouraging students to send their financial aid dollars to a third party bank account, enacting public disclosure of debit card agreements between colleges and banks, and halting co-branding of debit and check cards between colleges and banks.
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U.S. PIRG, the federation of state Public Interest Research Groups, is a consumer group that stands up to powerful interests whenever they threaten our health and safety, our financial security, or our right to fully participate in our democratic society. www.uspirg.org
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