CFPB: Many campus banking accounts come with costly fees and risky features
Consumers Union calls on schools to negotiate better deals for students
December 14, 2016
WASHINGTON, D.C. – Many colleges and universities that sponsor campus bank accounts aren’t doing a good job negotiating favorable terms for students, according to a new report by the Consumer Financial Protection Bureau. The CFPB found that accounts offered on campus as part of a general marketing agreement with banks typically have limited protections against high fees. As a result, students at larger universities could end up paying hundreds of dollars in overdraft and other abusive fees every year and enjoy fewer protections than are widely available with other alternatives.
Consumers Union, the policy and mobilization division of Consumer Reports, called on schools that offer campus banking products to negotiate contracts that restrict abusive features and promote their students’ best financial interests and to prominently post their contracts online as required by new Department of Education rules.
“Campus banking products shouldn’t be a financial windfall for colleges at the expense of students,” said Suzanne Martindale, staff attorney for Consumers Union. “Today’s report makes clear that many students are at risk of getting nickeled and dimed by fees that can put a real dent in their finances. Schools should negotiate marketing agreements with banks that maximize value and protect students from abusive and costly fees.”
In recent years, financial firms have increasingly marketed banking products to students at colleges and universities across the country. According to the CFPB, more than 10 million students – or 40 percent – attend a college or university that has a joint marketing agreement with a financial institution to offer deposit or prepaid accounts. The CFPB found that many of these agreements do not prohibit potentially abusive fees, including overdraft fees, monthly maintenance fees, and out-of-network ATM fees.
The CFPB’s report confirms many of the same findings of a 2014 Consumer Reports investigation of campus banking product offerings from nine financial firms. Consumer Reports found that, while some offered simple, low-cost fee structures and convenient access to funds, others came with high or multiple usage fees that added up to significant annual costs for those who used their cards frequently. Furthermore, accessing fee information proved very difficult.
In addition to the report, the CFPB also issued guidance today for schools with credit card marketing agreements, recommending that they post their contracts online to make sure they are accessible to the public as required by the CARD Act. Consumers Union has long advocated for online posting of credit card contracts, after a CU secret shopper investigation in February 2015 revealed it was difficult to obtain information about contracts.
Contact: Michael McCauley, email@example.com or 415-431-6747, ext 7606