CFPB Proposes Draft Template for Student Banking Options

Update (Feb. 13, 2015): The comment period has been extended to March 30, 2015.

The Consumer Financial Protection Bureau has proposed a template for colleges and universities to use when issuing requests for proposals (RFPs) that include provision of financial accounts to students. Based on an earlier template developed by the Federal Deposit Insurance Corporation (FDIC) for banks offering accounts targeted to low- and moderate-income consumers, the Safe Student Account Scorecard is intended as a tool to help institutions set parameters for student financial accounts sponsored by or otherwise connected to the institution and to compare offerings.

NACUBO's best practice guidelines for student banking relationships encourage colleges and universities to use competitive bidding processes when selecting financial partners and to put the well-being of students first.

According to CFPB, recent concerns about student bank accounts and prepaid cards used by some schools as an option for disbursing credit balances have led some colleges and universities to approach the bureau for advice on gathering the right information from potential financial institution partners and making decisions about the best deals for their students. The template, whose use would not be mandated, involves 10 questions requiring a response from bidders. The questions cover fees and features of the student account, additional services available, marketing practices, and transparency about the contract terms.

In some of the questions, CFPB seems to suggest that colleges impose certain requirements on financial institution partners. These requirements bear a striking resemblance to proposals made by consumer representatives and others during recent Department of Education meetings on its cash management rules and to earlier CFPB proposals. For instance, the transparency section would require the financial institution to post the agreement and a summary of the agreement on its website and "any portal through which students may sign up for an account." The marketing section addresses sharing information with students, providing access devices (cards), and prohibiting gifts to school employees.

CFPB asks for responses by March 30 to its Request for Information. The questions include:

• What are the potential advantages and disadvantages of separately negotiating arrangements with prospective financial institutions to market financial products to students, compared to including these arrangements as part of a broader relationship with a financial institution encompassing other services?
• What other information would be useful for institutions of higher education to solicit from potential marketing partners to assist them in determining whether financial product offerings are safe and affordable for their students?
• For existing arrangements between institutions of higher education and financial institutions to market student checking accounts, prepaid cards, and other financial products, what fees do students most frequently incur? To what degree do transaction patterns and fees vary among different student populations? How does this compare to the frequency of fee assessments on accounts unrelated to these marketing arrangements?

NACUBO intends to submit comments to the CFPB. Members are encouraged to share their thoughts with the association as well as with the bureau.