Senator Durbin Announces Plan to Examine Campus Debit Cards
June 1, 2012
On May 30, the U.S. Public Interest Research Group Education Fund (PIRG) released a report on bank-affiliated campus cards. In the report PIRG claims that banks are siphoning federal financial aid dollars from students using campus cards. The report also includes recommendations to institutions and tips for student consumers on avoiding high fees.
In response to the report, U.S. Senator Dick Durbin (D-IL) released a statement saying, "Students, parents and taxpayers should be outraged by unreasonable fees and sweetheart deals involving campus debit cards." He continued, "It's time for schools to reexamine the costs associated with campus debit cards and ensure that students are given clear and transparent choices. I will be working in Washington to put an end to the unreasonable practices highlighted in this report and to protect taxpayer investment."
NACUBO strongly encourages campuses to identify banking services that offer low- or no-fee options for students and endorses transparency and full disclosure in marketing financial products and services to college students. However, the U.S. PIRG report conflates the student aid refund process with debit-linked college and university campus cards. The report also fails to adequately recognize that students have a choice in deciding where and how to manage personal banking and financial transactions and that campus cards are offered by campuses for service, convenience, and security.
Institutions' continuing efforts to contain college costs include effective cost management and streamlining administrative services. The report misleads readers to believe that campuses profit by providing electronic refunds of student financial aid dollars.
The PIRG recommendations for campuses include:
- Schools should provide students a clear and unbiased choice of where to bank. Schools should ensure that students can elect to receive their student aid and other refunds through their own bank accounts online or via a check, rather than undertaking a complex paper process that attempts to direct students to bank preferred options.
- Campuses should negotiate away fees students incur on their debit cards and make it easier to avoid fees.
- Schools should not enter into revenue-sharing agreements with banks.
- Schools should take responsibility for all marketing, including managing websites that allow students to select their disbursement option, and provide financial aid debit cards and bank-branded student IDs only to students who opt in.
- Schools should closely guard student information and never share it-particularly with a for-profit company aimed at increasing profits. At the very least, schools should ensure that student contact information cannot be used for any secondary purpose in any other avenue of marketing beyond initial contact for participation in the campus card program.
- For accounts not related to federal student aid, student checking accounts should meet the minimum requirements of the FDIC Model Safe Accounts Template, modified to address the needs of students. Fees on student accounts should be commensurate with services rendered, and all fees should be provided prominently on the bank's website or mailers.
- Schools should publicly disclose a breakdown of the average annual costs incurred by students based on debit cards activated via-third party servicers.
- Schools should enter into third-party contracts with banks carefully. The college may be ultimately liable if it violates the law or regulations.
- Schools should insist on elimination of any pre-dispute mandatory arbitration clause in any student contract. Pre-dispute mandatory arbitration immunizes bad behavior from legal action and perpetuates unfair practices.
The full copy of the report is available.
For NACUBO's response to the report, please refer to these documents:
Director, Federal Affairs