A Consumer Financial Protection Bureau (CFPB) report examining student banking product marketing initiatives is questioning whether marketing deals between colleges and financial institutions comply with Department of Education (DOE) guidance.
“Many college students trust that schools have their best interests in mind,” CFPB Director Rohit Chopra said. “While colleges have substantial bargaining power to obtain superior terms and pricing for their students, we find that many college-sponsored financial products cost students more than accounts that are readily available on the open market.”
Chopra said the report, compiled for Congress to fulfill the agency’s Credit Card Accountability Responsibility and Disclosure Act (CARD Act) requirements, suggests additional work to do to ensure students are not steered into school-endorsed products with junk fees.
“We will continue to work with the Department of Education to help students find the best possible products,” Chopra concluded.
Per the report, some financial institutions collaborate with domestic colleges and universities to disburse federal financial aid and provide students with financial products that include credit cards and prepaid and debit accounts.
The CFPB acknowledged that while the partnerships support students’ financial health, the student-centered products are typically more costly than what students might otherwise encounter in the market.
The report maintains that the entity dominates the financial aid disbursements market by providing almost 70 percent of the accounts offered in partnership with schools while imposing surprise monthly fees. Students are directed to lists of account options not appearing to meet DOE requirements.
The DOE has issued guidelines clarifying schools’ responsibility to ensure campus financial products are consistent with students’ best financial interests while bolstering enforcement of its cash management regulations by tracking new data and conducting college banking arrangements in oversight.