A group of congressional Democrats recently introduced a number of bills in the Senate and House aimed at banning agreements between financial institutions that steer students to high-cost debit cards and increasing transparency across campus-sponsored financial products.
Sen. Tom Harkin (D-Iowa), along with Sens. Dick Durbin (D-Ill.) and Elizabeth Warren (D-Mass.), introduced the Protecting Aid for Students Act.
Rep. George Miller (D-Calif.) spearheaded the effort in the House, introducing the Curbing Abusive Marketing Practices with University Student (CAMPUS) Debit Cards Act with Maxine Waters (D-Calif.) and Peter Welch (D-Vt.), along with 59 additional cosponsors.
Both pieces of legislation would ensure students were not pressured into high-cost financial products and that they had access to their funds. The bills also seek to eliminate conflicts of interest and end kickbacks between schools and banks.
“Many of today’s college students are being strong-armed into using financial products that are endorsed by their university,” Miller, the senior Democrat on the House Committee on Education and the Workforce, said. “These products often carry unnecessarily high fees that chip away at students’ federal grants and loans, which should be helping pay for classes, not lining the pockets of banks. In reality, these ‘preferred’ products aren’t preferable at all. We stopped colleges from selling out their students to credit card and student loan companies five years ago, and now banks are at it again with checking accounts and debit cards. We need to act once again to clean up campus banking, eliminate the multi-million dollar kickbacks banks are paying out for preferred treatment, and protect students from being exploited.”
Earlier this year, the Government Accountability Office (GAO) released a report that showed 11 percent of colleges in the U.S. had agreements with financial institutions to provide debit or prepaid services, and most offered students the option of receiving federal student aid on a payment card.
The report showed fees charged by card providers were usually comparable to those of similar products offered by banks, though two main providers charged a fee for PIN purchases that is not generally charged by other debit cards. The GAO said some providers declined to provide data or said they were unable to provide data regarding total fees paid by students.
The legislation has support from the Center for Responsible Lending, the United States Student Association, Public Interest Research Group, Consumers Union and Young Invincibles.