Bucks Blog: Campus Banking Practices Come Under Scrutiny

College students are much sought after as banking customers, since young people are likely to stick with the institutions they choose for their first accounts.

On Thursday, the Consumer Financial Protection Bureau said it was opening an inquiry into bank accounts and debit cards marketed to students through colleges and universities to determine if such arrangements are in the best interest of students.

“The bureau wants to find out whether students using college-endorsed banking products are getting a good deal,” Richard Cordray, the agency’s director, said in a prepared statement.

The Credit CARD Act of 2009 barred banks from aggressive marketing of credit cards on campus, and required that agreements between credit card issuers and colleges be made public.

But, the agency said, less is known about deals for other financial products, including college-affiliated bank accounts, and contracts between schools and banks to disburse financial aid to students. Students, including those attending community colleges, often receive financial aid in excess of tuition, and can use the extra money to pay for textbooks and other costs. The banks often provide a debit card, linked to an account, to distribute the funds, and students sometimes think they are required to use the bank promoted by the school to obtain their scholarship or loan money. Some colleges even issue college-branded student identification cards that double as debit cards.

In some cases, companies providing the debit cards for financial aid have come under fire for charging excessive fees. Higher One, a big marketer of student debit cards, last summer settled allegations by the Federal Deposit Insurance Corporation that it had charged excessive fees to students who overdrew their accounts.

Now, the bureau said it is seeking information from students, colleges and banks on what information colleges share with banks when they enter such agreements; how accounts and cards are marketed to students; what fees students are charged; and how students use the cards and accounts in their day-to-day lives.

Comments will be accepted until March 18.

Rohit Chopra, the agency’s student loan ombudsman, said in a telephone interview that students are already under financial pressure from borrowing money to finance their educations. So it’s important, he said, that they aren’t also subject to excessive fees that can chip away at their finances.

Colleges, he said, also need better information, so they can negotiate agreements with banks that contain appropriate protections for students, who often trust that any college-endorsed product must be beneficial to them.

The agency offers a tool on its Web site to help educate students about the best way to select a bank account.

“We want students to know they can, and should, shop around,” he said. The account promoted by their college isn’t necessarily the best deal for them.

Have you used a college-endorsed debit card? How has that worked out for you?

Article source: http://bucks.blogs.nytimes.com/2013/01/31/campus-banking-practices-come-under-scrutiny/?partner=rss&emc=rss