Student financial products get U.S. scrutiny

A consumer agency seeks information on cards and accounts pitched on campuses.

The Consumer Financial Protection Bureau is inquiring into whether students are getting good deals on financial products marketed to them through colleges and universities.

A 2009 law restricted credit card issuers from certain types of marketing on college campuses and made agreements between the financial firms and colleges subject to public disclosure, the consumer bureau noted in an announcement Thursday.

But less is known about arrangements for other products marketed to students, such as identification cards that double as debit cards, cards used to access scholarship and student loan funds, and school-affiliated bank accounts, the agency said.

It is asking the public, students, families, educators and financial firms to provide input on their experiences with these products.

The issues include information that schools share with financial institutions, how the products are marketed to students and the fees students pay. Comments will be accepted through March 18.

The consumer bureau provides information online to help college students handle their loans and choose new credit cards and checking accounts.

A U.S. Public Interest Research Group report in May said more than 9 million students are at risk of increasing their educational debt because of bank-affiliated student debit cards with high fees, insufficient consumer protections and few options.

Financial institutions have partnerships with almost 900 U.S. campuses, grafting bank products onto student IDs and other campus cards to deliver billions of dollars in federal financial aid to students, according to the report. Students should not have to pay to receive federal aid, said Rich Williams, coauthor of the report.

“Campus debit cards are wolves in sheep’s clothing,” he said at the time. “Students think they can access their dollars freely, but instead their aid is being eaten up in fees.”

One sponsor of the debitcard partnerships, Higher One Holdings Inc., agreed in August to return about $11 million to about 60,000 college students who had been charged multiple overdraft fees in connection with a single transaction — a violation of federal law, the Federal Deposit Insurance Corp. said at the time. Higher One also allowed debit accounts to remain overdrawn for long periods as overdraft fees piled up and engaged in other deceptive practices, the FDIC said. The actions took place from 2008 to 2011.

Higher One also agreed to pay a $110,000 civil fine and change the way it imposes fees, while Bancorp Bank, which issued the OneAccount debit card administered by Higher One, agreed to a $172,000 civil fine.

U.S. Rep. George Miller (D-Martinez), the senior Democrat on the House Education and Workforce Committee, said an investigation by the panel found that at least 21 California colleges and universities had no oncampus ATMs where funds could be withdrawn at no charge. In some cases, the nearest no-fee ATM was 100 miles away.

Legislators share U.S. PIRG’s concerns about whether students receiving federal loans and Pell grants via debit cards are being “nickeled and dimed,” Miller said.

“I think clearly the CFPB has to ask those same questions.”