On Monday, September 30, Anne Gross, vice president for regulatory affairs, represented NACUBO in a forum on “Banking on Campus” hosted by the Consumer Financial Protection Bureau (CFPB). The discussion centered on responses to a CFPB notice issued earlier this year asking about financial services and products offered by third parties in connection with credit balance disbursement, as well as affinity programs.
NACUBO filed comments in response to the RFI, in which we shared our debit card best practices, developed using data from a July 2012 survey and input from the Student Financial Services council. NACUBO urges campuses to regularly review this guidance. We recognize that higher education institutions continually explore ways to offer improved service to students and their parents, as well as find cost savings for the institution, and financial options such as campus debit cards have evolved to provide an administratively efficient, cost-effective customer-oriented product. At the same time, colleges and universities should ensure that students’ consumer interests are protected as they shift more financial transactions to third parties.
In his opening remarks at the forum, Richard Cordray, CFPB Director, raised concerns about the degree to which young people on campuses are offered financial products with fair deals. Cordray stated:
“Students and their families trust our colleges and universities for fostering ideas, learning, and betterment. These institutions can greatly influence the decisions that young people make because students want to believe their school looks out for them and puts their interests first.
Unfortunately, trust in higher education can be undermined when schools are not careful about whom they partner with to provide their students with financial products and services. We are distressed to hear that some students feel pressured to use specific products and may be unaware that when they sign up for those products their schools are secretly making money.”
During her presentation, Anne Gross emphasized that NACUBO advocates keeping students’ interests at the forefront. She said, “[NACUBO’s guidance] recommends that campuses use competitive processes to select vendors and partners and involve student representatives in their selection process—and that they be transparent about the terms of any contracts they enter into. They are challenged to negotiate low- or no-fee options and convenient services for students and to oversee marketing efforts to ensure students are presented with a fair explanation of services and not with misleading, biased, or aggressive marketing.”
Reminding participants that the consumer finance world is changing rapidly, Gross noted NACUBO’s guidelines also encourage colleges to provide students with electronic refund options—which are safer, faster, more convenient, and less expensive.
When NACUBO polled its members in the summer of 2012, just 12 percent of the approximately 400 survey respondents indicated their institution had a relationship with a bank that allows students to tie a bank account to a student ID card. NACUBO benchmarking data shows that only 4 percent by dollar volume of student credit balance refunds in 2012 were made to a stored value card, with considerable difference by type of institution. At community colleges, for example, 20 percent of refunds go to cards; usage at research universities and small institutions is at one-tenth of a percent or less.
NACUBO also pressed CFPB to ensure that all parties talk about banking services in the larger context of what’s available from various financial institutions across the country and to remember that colleges and universities are not the only public entities making these types of choices—for example, governments increasingly do so as well. “We need to avoid the temptation to focus on one type of fee and use that as evidence of exploitation,” Gross cautioned.
“The interests of colleges and universities often align with the interests of their students rather than oppose them,” she reminded the forum’s participants. “When colleges look for a less expensive way to provide enhanced services to their students, both win in terms of convenience, security and efficiency. When colleges can negotiate to provide options for students and at the same time provide additional outside resources for scholarships, academic program support, student activities, internships, and financial literacy education, it is again a win-win situation.”
Other participants in the forum included current and former students, plus representatives from the Department of Education, the New York Attorney General’s Office, TouchNet, and the consumer advocate groups US PIRG and the National Consumer Law Group.