Lawmakers want CFPB input on use of college debit cards to disburse financial aid

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In addition to a flurry of news reports, the U.S. Public Interest Research Group Education Fund’s report on the use of debit cards to disburse federal financial aid to college students has also triggered a letter to the CFPB and the U.S. Department of Education by two Democrat lawmakers. Issued last month, the report found that nearly 900 colleges and universities have agreements with financial institutions under which debit cards are issued to students to access any balance of their financial aid  remaining after amounts for tuition and fees have been deducted. 

The letter was sent by Senator Richard Durbin (D-IL) and Representative George Miller (D-CA) and indicates that the lawmakers “have opened an inquiry into the use of bank-sponsored debit cards to disburse federal student aid.” It asks the CFPB and DOE, on a coordinated basis, to “carefully examine the full-range of bank-affiliated student debit card practices at participating schools.” The letter refers to various “troubling practices” identified in the US PIRG report, such as charging “numerous, opaque fees” and “subjecting students to aggressive and misleading marketing.”    

The letter also asks the CFPB and DOE to provide information on several specific issues, including (1) how much fees and penalties cost a student, on average, (2) whether the fees and penalties violate any federal statutes or regulations, (3) whether the debit cards provide adequate consumer protections, and (4) to what extent the DOE is pursuing enforcement action.