NACCU 2014 gave conference attendees the opportunity to learn more about the proposed Department of Education regulations for campus banking partnerships. Presenters highlighted the clauses that could most acutely affect campus card systems. More than 200 campuses took advantage of the opportunity to learn about the pending rule changes.
As the conference concluded, the new draft of rule changes was released by the DOE.
Under the initial draft, campuses issuing debit cards to students for access to federal aid would not be able to assess ATM usage, account maintenance, or overdraft fees. Additionally, universities would be obligated to post their agreements with debit card providers online.
As of April 17, a new draft of regulations has been released to assess changes to certain areas, while leaving other clauses just as opaque as before.
The new draft notably removes the clause stating that a campus card cannot bear both the school logo or seal and the logo of a banking institution or third party provider. This clause had caused major concern amongst universities, as it would have required any institution with co-branded cards to re-card their entire campus population.
There remains, however, a clear prohibition on the fees that will be associated with student card accounts.
Initially, the Department of Education stipulated that no fees would be assessed for any ATM transactions, nationwide – a demand that would be incredibly difficult for any financial institution. Under the latest draft, this has been reworded, though the result is no easier to stomach.
Under the new draft, the student or parent does not incur any cost associated with the following:
Opening the financial account or initially receiving the debit card, prepaid card, or access device associated with the account.
Maintaining the account, such as a monthly maintenance fee, inactivity fee, or account termination fee.
Using the debit card, prepaid card, or access device to conduct up to 4 cash withdrawals per month or statement cycle at any out-of-network ATM located in a State.
Using the debit card, prepaid card, or access device to conduct point-of-sale purchases or to receive cash back from point-of-sale purchases.
Four fee-less cash withdrawals at out-of-network ATMs per month will be particularly troubling for financial institutions.
Public disclosure of a university’s contract agreement with a bank or third-party provider will still be required under regulation as well. A university must “disclose conspicuously on the institution’s website, and otherwise make public, that contract or arrangement in its entirety with an accompanying summary of the terms and conditions of the contract or arrangement and other related information.”
This disclosure, according to the Department of Education, must include:
The name of the financial institution offering the sponsored account, and the third-party servicer or other parties involved in opening or enabling the sponsored account.
Whether the contract or arrangement provides for revenue sharing or royalty payments, and if so, the nature and amount of that compensation.
Whether the sponsored account is a checking account, prepaid debit card, or other type of account.
Any fees or charges associated with the account.
The number of allowable out-of-network surcharge-free ATM transactions.
The number of network or surcharge-free ATMs located on or near the campus.
Insiders suggest that if these regulations stand, banks and third-party disbursement providers are likely to walk away from their campus partners either by choice or necessity. The result for campuses could be a return to the old method of disbursement, the paper check.
Processing and sending paper checks is a process that universities nationwide have been happy to end, and many institutions would need to re-engineer processes to undertake this responsibility again.