Congress Members Urge Department of Education to Amend Rules Governing Banking Practices on College Campuses

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In a continued effort by federal and state legislators to curb alleged abuse by financial institutions on college campuses (see March 5, 2013 Alert), several members of Congress sent a letter to the Department of Education expressing their support for changes to the Department of Education’s Title IV cash management rules. Citing reports by the Government Accountability Office addressing high fees charged by some financial institutions and financial institutions paying multi-million dollar kickbacks to some colleges for exclusive marketing access, the letter called for the Department of Education to use its rulemaking authority to mandate contract transparency, prohibit aggressive marketing and ban high fees when colleges partner with banks to sponsor financial products. In particular, the letter asked that the Department of Education adopt rules that would (1) ban colleges from entering into preferred relationships with financial institutions for financial products that charge fees associated with disbursements and use of Title IV aid, as well as ban revenue sharing deals with financial institutions, (2) ensure students receive neutral information and require colleges to post agreements with financial institutions on their websites and report them to the government and (3) ensure students can easily deposit federal financial aid into their personal accounts without delay or penalty.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this informational piece (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

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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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