When the Department of Education published revisions to its cash management regulations in 2015, most of the rules took effect in July 2016. As dates for two other requirements rapidly approach, ED has requested comments by June 8 on a proposed format for complying with new disclosure requirements.
Both provisions with compliance dates in 2017 relating to account fees students are charged by financial institutions that have so-called Tier 1 (T1) or Tier 2 (T2) arrangements with a college or university.
Features and Commonly Assessed Fees
By July 1, institutions must ensure that the selection process students (or parents for PLUS loans) use to choose how they want to receive a refund “list[s] and identif[ies] the major features and commonly assessed fees associated with all financial accounts” if the school offers such an arrangement.
The provision at §668.164(d)(4)(b) offers what amounts to a safe harbor: “If an institution follows the format and content requirements specified by the Secretary…it will be in compliance with this requirement …” ED said it would consult with the Consumer Financial Protection Bureau (CFPB), which was also considering standard fee disclosures for prepaid cards and bank accounts on the model format.
In a May 9 Federal Register notice, ED proposed a format and content for this disclosure, requesting comments from interested parties no later than June 8. For prepaid accounts, also known as general purpose or stored value cards, ED recommends the short form disclosure laid out by the CFPB in its November 22, 2016, rulemaking (see page 84342).
Some Tier 1 and most Tier 2 arrangements relate to bank accounts rather than prepaid card accounts. For these, ED recommends virtually the same format.
The Request For Information (RFI) also proposes that, for institutions choosing to use these formats, their disclosures must:
- List seven specific fee types, even if the amount of the fee is zero or relates to a feature not offered on the account.
- Include the number of fee types the accountholder may be charged, not counting those that are disclosed on the form.
- List two additional fee types and amounts that generated the highest revenue during the previous two years.
- Include statements regarding overdraft features, insurance, and a link to the terms and conditions of the account.
- Include a written statement that students don’t have to accept the Tier 1 or Tier 2 account.
Schools are also reminded of other statements that must be made in close proximity to the disclosure specific to T1 and T2 accounts.
The RFI closes with eight questions to consider in responding. ED is unlikely to provide final guidance by the July 1 effective date of this disclosure requirement. Business officers should consider the impact of the timing on their institution’s ability to meet the deadline and ensure compliance. Because this guidance provides a safe harbor rather than a mandatory format, schools may prefer to make the disclosure by July 1 anyway, since the timing fits their calendar, and plan to make formatting changes for the following term. NACUBO would appreciate hearing from members on their thoughts and concerns with the proposals put forth by ED.
The other requirement that was delayed is disclosure of additional details related to T1 and T2 contracts. Institutions have to post these contracts on their websites by September 2017.
By September 1, 2017, institutions need to add to their websites: (1) the total consideration paid or received by parties under the terms of the contract and (2) the number of students with accounts under a T1 or T2 arrangement at any time during the previous award year and the mean and median of fees charged them. ED provided guidance on how to calculate these amounts in last September. According to the regulations, these disclosures must be in a format established by ED, which has not yet been released. NACUBO will continue to closely follow developments on this issue.