CFPB Report Reveals Trends in Fees Charged on College-Endorsed Student Banking Products

Student Banking Products Colleges and financial companies may be directing students toward more expensive financial products, despite guidance from the U.S. Department of Education.

10/17/2022 2:45 P.M.

3 minute read

The Consumer Financial Protection Bureau has released a report on the terms and fees connected to banking products marketed in partnership with colleges to students.

According to the research, some marketing agreements between colleges and financial institutions may not adhere to U.S. Department of Education (DOE) regulations. The report also emphasizes how the agreements schools have formed with financial firms lack transparency.

Along with the publication of this study, the DOE issued guidance to schools on what constitutes acceptable college-sponsored banking arrangements and committed to increased oversight of this matter.

“Many college students trust that schools have their best interests in mind,” said CFPB Director Rohit Chopra. “While colleges have substantial bargaining power to obtain superior terms and pricing for their students, we find that many college-sponsored financial products cost students more than accounts that are readily available on the open market. Today’s report suggests that there is more work to do to ensure that students are not steered into school-endorsed products with junk fees. We will continue to work with the Department of Education to help students find the best possible products.”

A small group of financial institutions collaborates with hundreds of colleges and universities in the U.S. to provide federal financial aid and offer students financial goods like credit cards and prepaid and debit accounts. These alliances frequently state that they help students’ financial stability, but the products sold to students are frequently more expensive than those they might normally obtain on the market.

Key Findings

Data from 11 account providers, including non-bank financial service providers, banks and credit unions, were included in the CFPB’s research. These account providers offered more than 650,000 student accounts in collaboration with 462 institutions of higher education during the 2020–2021 Award Year.

Here are CFPB’s key findings:

  • Financial services providers and their partner schools appear to offer and promote more costly products to students than are otherwise available in the market.
  • One entity dominates the market for financial aid disbursements, providing nearly 70% of the accounts offered in partnership with schools—and imposes surprise monthly fees.
  • Many students are directed to lists of account options that do not appear to meet the DOE’s requirements. The CFPB identified instances where students were told that financial aid payments might not be as timely if students didn’t choose a college-sponsored account.
  • Many agreements between financial institutions and colleges do not appear to be posted prominently as required. Nearly 30% of accounts in the CFPB’s sample were subject to arrangements in which the financial services provider made payments to the partner school.

The DOE’s Oversight

The DOE clarified last week that schools are obligated to guarantee that campus financial products are in line with students’ best financial interests, including by examining whether any fees imposed are in line with or lower than going market rates.

Given that financial institutions in the general market have been progressively lowering or eliminating some fees, this guideline addresses overdraft and NSF costs. The department also disclosed that it would employ more people to oversee college financial arrangements and track new data in order to improve enforcement of its cash management standards.

The CFPB’s report is the 12th annual report to Congress in fulfillment of the CFPB’s requirements, pursuant to the Credit Card Accountability Responsibility and Disclosure Act.

The report reviews agreements and data covering the over 1.2 million student checking and credit card accounts that are governed by partnerships between institutions of higher education and financial services providers, and highlights market trends and possible risks.

Read the complete report here: College Banking and Credit Card Agreements

Related ACA International Content

CFPB Supervisory Highlights Dive into Federal Student Loan Servicing

Legal Challenges to Student Loan Debt Forgiveness Grow

If you have executive leadership updates or other member news to share with ACA, contact our communications department at [email protected]. View our publications page for more information and our news submission guidelines here.

This site uses cookies. By continuing to use our site, you are agreeing to our use of cookies. Review our Privacy Policy for more information. You may change your preferences on how cookies are stored by reviewing the settings on your browser.

The content on this site is presented for educational, general reference, and informational purposes only; is not intended to serve as legal or other advice; is not intended to be a full and exhaustive explanation of the law in any area; and should not replace the advice of your own legal counsel. By continuing to use our site, you are agreeing to the legal disclaimers in our Terms of Use. Review our Terms of Use for more information.

Friendly Reminder

Get continued access to ACA International’s wide array of resources, which can help you become more profitable, compliant and successful.

Renew your membership today to take advantage of tools you won’t find anywhere else:

  • Discounts on seminars, products, services and events
  • Resources to strengthen your compliance department
  • Industry-specific risk management products and services
  • Participation in ACA’s online community, The Hub
    Members-only website content
  • Professional development and training opportunities, and so much more!

If you have completed your renewal, please disregard this reminder.