CFPB Event Focuses On Student Banking


On September 30, the CFPB (or the Bureau) hosted a “Banking on Campus” forum, an event it described as a continuation of its February 2013 request for information about financial products and services marketed to college students. The event featured remarks from government officials, including the CFPB and the U.S. Department of Education, as well as presentations from students, school officials, financial institution representatives, and consumer advocacy groups. Generally, the discussion centered on the potential financial impact of exclusive marketing arrangements between schools and financial service providers on students, particularly with regard to financial aid disbursement products.

Director Cordray provided opening remarks in which he stated the Bureau’s concern that colleges and universities may be encouraging or even requiring students to use financial products that do not offer the best deals, while the schools are “secretly making money” from marketing agreements with financial service providers.

CFPB Student Loan Ombudsman, Rohit Chopra followed with a presentation that summarized the findings from the Bureau’s request for information, which may indicate the direction the CFPB will take in further scrutinizing student banking products and services.  According to Mr. Chopra, the CFPB received 162 responses to its request for information and reviewed publicly available information. The Bureau’s initial observations include, among others, that: (i) financial product marketing partnerships have shifted to student checking, debit and prepaid card products (particularly student ID card accounts and financial aid disbursement cards/accounts); (ii) college affinity products generally do not appear to have more attractive features compared to other student checking products; and (iii) marketing arrangements between financial institutions and institutions of higher education for many student banking products are not well understood.

Mr. Chopra identified the following as questions requiring further exploration:

  • How can colleges and universities better use their bargaining power to negotiate better product terms and conditions?
  • How can students be better equipped to shop for student checking, debit, and prepaid card products?
  • What obstacles do colleges and universities face when seeking to adopt established professional best practices on disclosure of debit card arrangements?
  • Have colleges and universities established codes of conduct for employees who negotiate marketing agreements for checking, debit, and prepaid card products?
  • How does the delivery model for federal student aid impact this market, and what can be learned from other federal benefit delivery models, such as Treasury’s Direct Express program?

Several of the student and consumer advocacy group panelists claimed that under exclusive marketing arrangements between financial service providers and schools, students are steered into unneeded and non-competitive products that result in unnecessary fees. Those participants called for more choice for students and stressed that schools should promote direct deposit of disbursement funds over the use of cards to allow students to choose their own financial service provider. At least one consumer group panelist called for revenue sharing agreements between schools and providers to be prohibited. Other participants referenced U.S. PIRG’s May 2012 report, which contains campus card best practices and recommendations for the CFPB to enforce the Electronic Funds Transfer Act, including by enforcing the rule that prohibits any person from being required to have an account at a particular institution as a condition of receipt of a government benefit

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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