Campus Debit Cards Clampdown
NEW YORK ( MainStreet) A 15-month long study of campus-branded debit cards released last week raised the possibility that fees charged to students will be reined in. The Department of Education (ED) is preparing to negotiate with issuers over new rules and regulations later this year.
The study was authorized by Congress and performed by the Government Accountability Office (GAO). It recommended that the federal government impose controls on these big cards on campus in the absence of other regulations.
The Credit Card Accountability, Responsibility and Disclosure Act the CARD Act passed by Congress in 2009, required credit card issuers to establish fair and transparent practices in issuing credit cards including agreements made with colleges and students who use these cards to access student aid. Those agreements have been made public by the Consumer Financial Protection Bureau in its online database. Not included in the CARD Act were caps on interest rates or fees.
And debit cards were left out. Senator Tom Harkin (D-Iowa) and Representative George Miller (D-Calif.) have since been trying to include greater controls put on these plastic instruments. Time may be running out on anything they can do, since neither one is running for re-election in 2014.
The GAO found that at least 852 colleges and universities out of 7,559 that participate in federal student aid programs had agreements to furnish debit or pre-paid card services to their students as of July 2013. Most gave students the option of having federal student aid loaded onto their cardsresulting in fees that are a source of revenue for card issuers and colleges.
While those 852 schools are only 11% of the total, they also represent large campusessome 10 million students or 39% of the 25.5 million schools participating in federal student aid programs.
In a comparison of selected account fees offered by debit cards providers, the GAO found that median fees from credit unions were cheaper for out-of-network ATM transactions, PIN-based transactions, overdrafts and outgoing wire transfers. Charges for monthly maintenance between credit unions and college card issuers were both zero; banks charged between $0 and $5 for student accounts.
The GAO concludes that the ED should require colleges and debit card issuers to give "neutral information" about their options for receiving federal grants and loan reimbursements, including what constitutes "convenient"and freeaccess to campus ATMS.
Have the debit card issuers gone too far in whacking students with fees? Regulators seem to think so and are most concerned with controlling costs to borrowers who are already struggling their loans.
In a February 3 letter to the GAO, Acting Assistant Secretary of Education Brenda Dann-Messier wrote, "We are committed to the development of policies and rules that help ensure efficient, convenient and fair access to federal student aid, including through college debit cards."