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August 24, 2014

Crapo notes concerns with Education 'sponsored accounts' rule

Aug. 14, 2014 – Senate Banking Committee Ranking Member Mike Crapo, R-Idaho, on Wednesday told Education Secretary Arne Duncan that the department's proposed rule on college students' "sponsored accounts" may be at odds with prudential financial institution regulators' rules on consumer accounts and related protections.

Crapo is asking the department to address numerous concerns with this rulemaking before moving forward on a final rule, which reportedly is being promulgated with a 2015 effective date in mind.

The department's rule would govern certain aspects of a sponsored account, defined as any account that an enrolled student (or his or her parent) might maintain to receive funds disbursed under Title IV of the Higher Education Act. Crapo said that the definition could be read to include any basic bank account opened by a student during freshman orientation "that never receives or was intended to receive" such funds.

Crapo said this may exceed the department's statutory authority and interfere with the prudential banking regulation of students' checking accounts. Fees and disclosures related to these accounts are subject to numerous federal and state consumer protection and safety-and-soundness rules, he noted.

The senator also noted concern that the department, in working with stakeholders on a proposed rule, did not consult with any prudential banking regulator.