Thursday, August 28, 2014

Consumer Reports:  Campus Banking Account Fees Can Add Up And Are Not Always Clearly Disclosed; Schools May Not Get The Best Deal For Students  

 Reforms Needed to Ensure Students Can Get Access to Financial Aid Funds Easily And Without Incurring Extra Costs

YONKERS, NY — Just as millions of students return to college, a new Consumer Reports investigation of campus banking products found that fees can vary widely and that costs can add up for those who use their cards frequently and don’t enjoy easy access to in-network ATMs.  Consumer Reports found that fees may not always be clearly disclosed and that schools may not always be negotiating a good deal for students.

The report includes tips from Consumer Reports and recommendations for policymakers and regulators from Consumers Union to ensure that students are able to make well-informed choices about accessing their financial aid funds without incurring unnecessary charges.  It is being released as the Department of Education is expected to propose new rules later this year to address concerns about campus banking products used to disburse financial aid.

“Students depend on financial aid to help make paying for college more affordable,” said Suzanne Martindale, policy counsel for Consumers Union, the advocacy division of Consumer Reports.  “The last thing they need is unexpected gotcha fees that eat away at the money they are counting on to cover expenses while at school.”

Nearly all college students have checking or savings accounts when they arrive on campus.  However, they may encounter additional options for receiving and managing their financial aid through school-sponsored bank accounts, prepaid card accounts, or accounts that can be linked to their student ID card.  The GAO has found that some schools fail to present financial aid disbursement options in a “clear and neutral” manner and “appeared to encourage” students to select school-sponsored accounts.

Schools may enter into agreements with banks, such as Wells Fargo or U.S. Bank, or non-bank financial firms such as Higher One, which is the largest firm offering financial aid disbursement services on campuses.  While these products can be convenient for students and cost effective for colleges and universities, certain campus banking products have come under scrutiny for their controversial fees and policies.  Banking agreements between schools and financial firms may result in arrangements that expose students to aggressive marketing tactics, high or unusual fees, and restricted choices for managing their money.

Consumer Reports reviewed campus banking products offered by nine different financial firms to compare their terms and calculate their average costs.  The investigation found that:

“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.”

To address these concerns, Consumers Union urges policymakers and regulators to adopt a number of needed reforms:

 

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Contact:  Michael McCauley, mmccauley@consumer.org or 415-902-9537 (cell) or 415-431-6747, ext 126 (office)