Monday, December 15, 2014
Student Protections Needed For College Debit & Prepaid Cards
WASHINGTON, D.C. — A new report issued today by the Consumer Financial Protection Bureau (CFPB) found that fewer colleges are entering into marketing partnerships with credit card companies. However, the CFPB found that many colleges with credit card agreements don’t do a good job making those agreements readily accessible to the public. Colleges have been required to disclose such agreements as a result of a reporting statute passed by Congress in 2009.
At the same time, the CFPB found that colleges and universities are increasingly forming marketing partnerships with financial institutions offering debit and prepaid cards, which are not subject to the same public disclosure requirements.
“Students deserve to know whether their school stands to profit from financial products being marketed on campus,” said Suzanne Martindale, staff attorney for Consumers Union, the advocacy division of Consumer Reports. “Federal regulators should make sure schools are following the law by disclosing credit card agreements to the public and these same reporting requirements should apply to debit and prepaid cards.”
According to the Government Accountability office, at least 852 schools have agreements to market debit or prepaid cards to students. These campus banking products are often used to disburse financial aid to students. Consumer Reports reviewed campus banking product offerings from nine financial firms, to compare their terms and calculate their average costs. It found that, while some campus banking products offered simple, low-cost fee structures and convenient access to funds, others came with high or multiple usage fees that added up to significant annual costs for those who use their cards frequently. Furthermore, accessing fee information proved very difficult.
“Students need safe and convenient access to financial aid funds without unnecessary and costly charges,” said Pamela Banks, senior policy counsel for Consumers Union. “Congress and federal regulators should take action to protect students from aggressive marketing practices, restricted choices, and high fees.”
For a detailed explanation of the reforms Consumers Union is advocating to protect students, see Campus Banking Products: College Students face Hurdles to Accessing Clear Information and Accounts That Meet Their Needs.
Contact: Michael McCauley, mmccauley at consumer.org, 415-431-6747, ext 126 or David Butler, dbutler at consumer.org, 202-462-6262