Comment period closes March 30, 2015
The Consumer Financial Protection Bureau (CFPB), an U.S. government agency tasked with guarding consumer interests in the financial services sector, has proposed a set of guidelines for student banking services.
The Safe Student Account Scorecard is a set of criteria that the CFPB would like to have included in request for proposals (RFP) issued by colleges and universities seeking to partner with financial institutions. The checklist focuses largely on fees charged to student account holders and revenues shared with the campus.
Use of the scorecard, based on the current verbiage, would be optional and specifically cites that “institutions of higher education can choose to include the following scorecard.” However, many fear it would become a de facto requirement due to political and other pressures, as well as a desire to avoid controversy.
Additionally, any action by the CFPB is likely to carry significant weight with the Department of Education staff as they work to complete their rules covering use of financial accounts and Title IV financial aid funds. This process began in Spring 2014 with the Negotiated Rulemaking process, but because unanimous agreement was not reached the DoE was left to create the rules independently. Insiders suggest a draft of these rules could be released during the second quarter of 2015.
For these reasons, it is important that both higher education institutions and financial service providers that offer these partnerships strive to help craft final language with which they can both be comfortable. Any comments, concerns or suggestions can be provided to the CFPB for consideration until March 30, 2015.
CR80News learned that a group of institutions are working together to comment, via NACUBO, in an effort to perhaps build strength via aggregate response. Other groups including banking associations are rumored to be prepping responses as well. Independent comments are also welcomed, and can be submitted via the link provided at the close of this article.
The opinion from many in higher education seems to be that the spirit of the CFPB Scorecard fits with the prevailing intent to provide quality, affordable services to students. However, certain areas are problematic.
The scorecard’s language suggests that a “Safe Account” prohibits overdraft or insufficient funds (NSF) fees. This is likely a legacy idea from the Department of Education’s Negotiated Rulemaking process that seemed intent on eliminating overdraft fees specifically related to Title IV funds. Because this scorecard makes no mention of Title IV funds, but rather student banking as a whole, this seems out of norm.
Another section states that partnerships will generally be expected to adhere to a set of principles including the following: “students shall provide written, affirmative consent before any access device is provided, including any unactivated device.” This is problematic for student IDs that feature combined bank account functionality. Often the student is provided with the ID card, with the option to activate the bank account subsequently made available at the individual’s discretion. If this practice were to be abolished, it would alter the issuance process and almost certainly increase the workload and cost inherent to the process.
Another area of concern involves the reporting of fees paid by student account holders. The scorecard states, “financial institution shall report to the school an annual summary describing the fees charged to account holders subject to this agreement, as well as details on the frequency of specific fees, including:
- Number of student account holders during the previous academic year
- ￼Average and median fees paid by a student account holder during the year
- Three fee types most frequently assessed during the year
- Average and median fees paid by a student for each fee imposed over the course of the year.”
While the spirit of this requirement may well intentioned, the execution may prove difficult or at a minimum, may require clarification. Typically, the partnering financial institution does not receive enrollment status of students from the university, so this data would at best be a generalization of all accounts created via the partnership. If it were to report on active students only, additional data sharing, agreements and work would be necessary.
At just seven pages, the CFPB scorecard is a quick, easy and important read. A supplemental document provides a mock, sample response from a fictitious bank. It actually provides as much insight to the potential process as the scorecard itself, so it too is well worth the quick review.
If you have comments, please share them with the CFPB and consider sharing with CR80News and the campus card community as well by sending them to [email protected] with a subject line CFPB Scorecard.
Providing comments to the CFPB
Comments must be received on or before March 30, 2015. Submit comments, identified by Docket No. CFPB-2015-0001, online at the Federal eRulemaking Portal:
Email comments can be sent to [email protected]. Be sure to include Docket No. CFPB-2015-0001 in the subject line of the message.
For additional information, contact Monica Jackson, Office of the Executive Secretary, at 202-435-7275.