August 24, 2014

Menendez urges Cordray, Duncan to protect students

Aug. 15, 2014 – Sen. Bob Menendez, D-N.J. wrote CFPB Director Richard Cordray and Education Department Secretary Arne Duncan to urge more protection for college students receiving financial aid.

Menendez raised concerns about "campus banking products" or "campus cards," saying: "Campus cards can expose students to hidden or abusive fees, including overdraft fees, swipe fees, ATM fees, inactivity fees, account closure fees, and fees to transfer the student's money from the campus card to his or her own account. Even worse, students may not be fully aware of these fees up front or of their alternatives for receiving financial aid funds, or the school or financial institution may sign them up through a process that disfavors lower-cost options."

Menendez said students should not be charged extra fees to access financial aid funds, and should not be encouraged to use high-fee programs. He also emphasized the need for protections to keep students' financial information private.

Earlier this week, Senate Banking Committee Ranking Member Mike Crapo, R-Idaho, told Duncan that the department's proposed rule on college students' "sponsored accounts" – defined as accounts a student uses to receive funds through Title IV of the Higher Education Act – may be at odds with prudential financial institution regulators' rules on consumer accounts and related protections. Fees and disclosures related to these accounts are subject to numerous federal and state consumer protection and safety-and-soundness rules.

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.