Policy

Feds Call for Comments on 'Safe Student Account Scorecard'

• By Dian Schaffhauser
• 01/21/15

The student ID card that links to accounts for doing financial transactions is getting a reboot on college campuses. The Consumer Financial Protection Bureau (CFPB) is taking comments on a project to develop a "Safe Student Account Scorecard," which will allow institutions to compare the proposals they receive for providing student banking from financial services companies. The new scorecard is intended to help schools better understand the fees and features of financial products before they contract to offer those to students. The University of California has signed on as an early proponent for the program.

This topic is important to young people, said CFPB Director Richard Cordray in a media call last week. "They may be managing money on their own for the first time, and they can become a focus for financial providers looking for new customers with a long future ahead of them."

He noted that 40 percent of college students attend institutions with agreements to provide debit or prepaid cards to their students. Frequently, the cards serve double-duty as ID cards used to gain access to buildings, make purchases at on-campus services, check out books from the library and other activities.

Many schools also have set up financial aid disbursement arrangements to distribute credit balances for grants, scholarships and student loan proceeds, with these funds going into a debit or prepaid card offered by a third-party company. That university endorsement leads to higher adoption by students who are receiving financial aid, the bureau said.

Yet colleges and universities aren't necessarily doing the best job they could at negotiating good terms for their students. In general, college "affinity products" don't appear to have more attractive features compared to other student checking products, the agency stated during a 2013 presentation on banking on campus. And both the schools and the financial services companies have found ways to monetize the products that aren't readily apparent to the students or their families. For example, colleges may receive some of the revenue generated through student accounts; and the accounts may be hit with excessive fees by the banks that provide them.

The draft scorecard being proposed by the CFPB takes the form of a questionnaire or request for information (RFI) to be filled out by the vendors interested in offering financial services to students. The college or university could compare those responses during their campus card selection process.

Questions guide the vendor through spelling out details of product features. For example, one set of questions in the scorecard focuses on fees for standard services (such as mobile banking or electronic statements) and non-standard ones (such as the use of in-network ATMs, account termination and check cashing). Other questions focus on marketing practices and contract transparency.

The University of California has already signed on in support of the scorecard. In a statement President Janet Napolitano said that she "applauded" the effort "to identify good financial practices and shine light on practices and services that financially harm students." The scorecard, she noted, would help schools "in evaluating financial contracts they negotiate with banks or financial institutions" and push financial service providers to seek out "best practices that the higher education community and the public will expect of their offerings."

Calling the initiative a "step in the right direction," Cordray emphasized that his bureau "wants to help colleges restore their role as trusted advisers to young people across the country."

The Bureau is taking comments about its proposed scorecard until March 16, 2015.