Bank Deals With Colleges Often Feature Higher Fees, CFPB Says

By Jeff Bater

The Consumer Financial Protection Bureau is raising concerns about fees and risks in marketing deals between banks and colleges.

The CFPB, releasing a new report on the financial agreements, said it analyzed roughly 500 marketing deals between schools and large banks. The bureau identified dozens of general marketing agreements that may feature accounts with higher fees or fewer protections than widely available alternatives that are safer or more affordable, it said in a report.

“In contrast, these marketing agreements tend to specify detailed terms describing the financial arrangement between colleges and banks, such as provisions detailing revenue sharing and other payments made in exchange for exclusive marketing access to a student population,” the report said.

The report shows many schools “are more focused on their bottom line than students’ well-being when they agree to sponsor financial accounts,” CFPB Director Richard Cordray said. “Deals between big banks and schools can drive students into accounts that contain high fees,” he said in a news release.

Marketing partnerships between colleges and financial institutions have shifted toward sponsored debit and prepaid accounts since Congress passed new consumer protections for credit cards in 2009.

The U.S. Department of Education established student protections for most college-sponsored financial accounts in 2015, and, as part of that effort, it published a database this year so the public could review terms of agreements between schools and financial institutions.

The CFPB analyzed those agreements and said it found that dozens of deals with banks for school-sponsored accounts do not place limits on account fees, such as overdraft fees, out-of-network ATM fees or other common charges.

David Pommerehn, senior counsel and vice president at the Consumer Bankers Association, told Bloomberg BNA the CFPB report doesn’t offer “any real hard data on what it means by excessive fees.”

Pommerehn also said that overdraft fees can be avoided easily. ”No one can incur an overdraft fee on any account, campus or non-campus, on a debit account if they do not opt in to that service,” he said.

To contact the reporter on this story: Jeff Bater in Washington at jbater@bna.com

To contact the editor responsible for this story: Michael Ferullo at MFerullo@bna.com

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