[Federal Register Volume 80, Number 17 (Tuesday, January 27, 2015)]
[Notices]
[Pages 4255-4258]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-01492]
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BUREAU OF CONSUMER FINANCIAL PROTECTION
[Docket No. CFPB-2015-0001]
Request for Information Regarding an Initiative on Safe Student
Banking
AGENCY: Bureau of Consumer Financial Protection.
ACTION: Notice and request for information.
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SUMMARY: The Consumer Financial Protection Bureau (Bureau or CFPB)
seeks feedback on a draft Safe Student Account Scorecard that offers
information to colleges and universities when soliciting agreements
from financial institutions to market safe and affordable financial
accounts for their students. The Bureau seeks comment from the public,
including student and parent consumers, institutions of higher
education, and financial institutions.
DATES: Comments must be received on or before March 9, 2015.
ADDRESSES: You may submit comments, identified by Docket No. CFPB-2015-
0001, by any of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Email: [email protected]. Include the title
and Docket No. CFPB-2015-0001 in the subject line of the message.
Mail: Monica Jackson, Office of the Executive Secretary,
Consumer Financial Protection Bureau, 1700 G Street NW., Washington, DC
20552.
Hand Delivery/Courier: Monica Jackson, Office of the
Executive Secretary, Consumer Financial Protection Bureau, 1275 First
Street NE., Washington, DC 20002.
Instructions: All submissions should include the agency name and
docket number for this proposal. Because paper mail in the Washington,
DC area and at the Bureau is subject to delay, commenters are
encouraged to submit comments electronically. In general, all comments
received will be posted without change to http://www.regulations.gov.
In addition, comments will be available for public inspection and
copying at 1275 First Street NE., Washington, DC 20002, on official
business days between the hours of 10 a.m. and 5 p.m. Eastern Time. You
can make an appointment to inspect the documents by telephoning (202)
435-7275.
All comments, including attachments and other supporting materials,
will become part of the public record and subject to public disclosure.
Sensitive personal information, such as account numbers or social
security numbers, should not be included. Comments generally will not
be edited to remove any identifying or contact information.
FOR FURTHER INFORMATION CONTACT: For general inquiries, submission
process questions or any additional information, please contact Monica
Jackson, Office of the Executive Secretary, at 202-435-7275.
Authority: 12 U.S.C. 5511(c).
SUPPLEMENTARY INFORMATION: Pursuant to the Dodd-Frank Wall Street
Reform and Consumer Protection Act (Dodd-Frank Act) that established
the Bureau, part of the Bureau's mission is to empower consumers to
take control over their economic lives. The Bureau is specifically
charged with promoting financial education, researching developments in
markets for consumer financial services and products, and providing
information, guidance, and technical assistance regarding the offering
and provision of consumer financial products or services to
traditionally underserved consumers and communities.
Section 1021 of the Dodd-Frank Act charges the Bureau with
``collecting, researching, monitoring and publishing information''
about consumer financial products and services. The Bureau seeks
feedback on a potential Safe Student Account Scorecard that colleges
and universities can voluntarily use when negotiating with providers to
ensure that financial accounts marketed to their students are accounts
that the college or university deems safe and affordable.
The Bureau is interested in receiving comments to develop a Safe
Student Account Scorecard. The Bureau is therefore interested in
responses to the questions outlined below. The deadline for submission
of comments is March 9, 2015. The Bureau encourages comments from the
public, including:
Student and parent consumers;
Student associations and consumer organizations;
Institutions of higher education and affiliated parties;
Providers of financial aid disbursement services;
Financial institutions; and
Other interested parties.
Please note that the Bureau is not soliciting individual student
account information in response to this notice and request for
information, nor is the Bureau seeking personally identifiable
information (PII) regarding student accounts from the parties or any
third party.
All comments, including attachments and other supporting materials,
will become part of the public record and subject to public disclosure.
Sensitive personal information, such as account numbers or social
security numbers, should not be included. Comments generally will not
be edited to remove any identifying or contact information.
Background
Colleges and universities have long played a role in the offering
of financial products to students. Institutions of higher education
have partnered with banks and nonbanks to offer a variety of financial
products and services, including loans under the now-discontinued
Federal Family Educational Loan (FFEL) Program, private student loans,
credit cards, student checking accounts, and closed-loop stored value
card services tied to student ID cards.
In February 2013, the Bureau published a Notice and Request for
Information on Financial Products Marketed to Students Enrolled in
Institutions of Higher Education.\1\ In September 2013, the Bureau
hosted the Banking on Campus forum, seeking comment on the market from
institutions of higher education, nonbank financial companies,
technology providers, depository institutions, students, and consumer
advocates.\2\
The Bureau found that financial product marketing partnerships have
shifted from credit cards and preferred student lender agreements
toward student debit and prepaid cards. There are now more agreements
to market student checking, debit, and prepaid
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cards than agreements to market credit cards.\3\
According to the Government Accountability Office (GAO), at least
852 schools had agreements to provide debit or prepaid card services to
their students as of July 2013. Enrollment at these schools accounts
for about 40 percent of all postsecondary students.\4\
Arrangements Between Institutions of Higher Education and Financial
Institutions
Institutions of higher education have developed commercial
arrangements with financial institutions to market a range of products
to students. For example, some of these arrangements are limited to
leasing university-owned property while others may be a sponsorship
agreement or affiliated with the institution of higher education's
athletics program. In many cases, these arrangements provide financial
institutions unique or special marketing access to students.\5\
Deposit Accounts Linked to Student ID Cards. Some institutions of
higher education automatically link bank accounts to their student ID
cards, while others allow their students to choose whether or not to
opt in to linking their accounts. In 2012, the National Association of
College and University Business Officers (NACUBO) found that 12 percent
of schools surveyed had linked student ID cards to deposit accounts.\6\
According to the GAO, the ability to link an account might impact a
student's choice in adopting a financial product.\7\
Marketing Access on University Property. Some financial
institutions include exclusive marketing, naming rights, and other
agreements in their contracts with schools. In addition to co-branding
on student ID cards, financial institutions sometimes give exclusive
rights to brand events and place signage on university property.
According to a report published by a consumer organization submitted as
a public comment to the Bureau, many students often think of co-
branding as an endorsement.\8\
Pay-for-Performance Bonuses. Many institutions of higher education
receive indirect or direct compensation from financial institutions in
connection with the offering of financial products. Some financial
institutions offer direct payments for use of college trademarks and
branding, others offer bonuses based on the number of student account
sign-ups, while others offer discounted--or even completely free--
services in exchange for marketing access.
Financial Aid Disbursement Accounts. Many students receive
scholarships, grants, and student loans that cover more than the amount
of their tuition, including costs like textbooks and transportation.
Many institutions of higher education partner with third-party
financial companies to disburse these funds directly to students. These
companies may even seek to promote a specific financial product where
financial aid proceeds could be credited. In 2012 and 2014, federal
agencies issued consent orders that involved one of the largest market
participants in the financial aid disbursement market for alleged
violations of various Federal consumer financial laws.\9\
Additional Challenges and Risks
While partnerships between financial institutions and universities
have the potential to provide benefits to students, there have also
been challenges.
In 2007, the New York Attorney General reported questionable
conduct by school officials, including university personnel who were
accepting compensation and gifts from lenders included on school
preferred lender lists and officials who owned stock in companies
offering loans to students.\10\ The Higher Education Opportunity Act of
2008 \11\ addressed many of these practices by requiring schools to
clearly disclose the method and criteria used to choose lenders
appearing on a ``preferred lender list'' and to develop a code of
conduct. The Act also generally restricted co-branding, such as the use
of a university logo or mascot.\12\
Many colleges and universities have also formed credit card
marketing agreements with financial institutions, which in some cases
have resulted in targeted marketing and incentive payments to the
school. The Credit CARD Act of 2009 \13\ restricted the use of tangible
inducements (``freebies'') for students when marketing a credit card on
campus, and required credit card issuers who enter into ``college card
affinity agreements'' to submit agreements \14\ to a public database
now administered by the CFPB.\15\
The CFPB has called on financial institutions to voluntarily
disclose agreements with institutions of higher education to market
products to students.\16\ Information about these arrangements is
already required to be disclosed when marketing credit cards and
private student loans to students. The CARD Act requirement is limited
to credit cards and does not include other financial products,
including prepaid cards and deposit accounts with debit cards, marketed
through schools. The CFPB has previously noted that making these
agreements available for all financial products can demonstrate a
commitment to transparency by financial institutions and their partner
schools, helping students and their families understand basic
information about these arrangements before choosing a specific
product.\17\
The GAO also noted that ``increased transparency for college card
agreements could help ensure that the terms are fair and reasonable for
students and the agreements are free from conflicts of interest.'' \18\
Additionally, NACUBO has urged institutions to publicly disclose the
terms of these agreements as they relate to debit card arrangements
used to access student loan and scholarship proceeds.\19\
According to a NACUBO survey of school officials, 69 percent of
debit card arrangements are already available to the public.\20\
However, finding these agreements can be difficult. For example, a
student may need to file a formal request under a state open records
law to obtain the information. Easier access to these arrangements may
increase the public's confidence that these agreements are structured
in ways that consider the interests of students.
Mechanisms for Developing Partnerships
Institutions of higher education use a variety of mechanisms to
develop partnerships with financial institutions. Many colleges solicit
marketing partners by publishing a Request for Proposal (RFP) as part
of a formal process to seek information from financial institutions.
According to a NACUBO survey, 60 percent of schools use a competitive
bidding process for establishing their relationships with vendors.\21\
The Bureau's scan of publicly available RFPs showed that RFPs from
institutions of higher education generally solicit proposals on a wide
range of banking services and student banking affinity arrangements are
usually only one component of those services. It appears that when
evaluating these arrangements, scores generally do not heavily weigh
student account features. Evaluation criteria rarely included a
consideration of product features and costs. Some of the RFPs included
a scoring system, where financial compensation to the school was
heavily weighted.
In light of recent concerns about the quality of banking products
being offered to students through official partnerships, institutions
of higher education have sought advice from the Bureau about how to
ensure that
[[Page 4257]]
product offerings marketed to their students are superior to those that
are generally available.
Safe Student Account Scorecard
The Bureau is seeking public input on material that institutions of
higher education can choose to include in their RFPs when soliciting
marketing partnerships with financial institutions. The scorecard, once
finalized, can help committees evaluating contract proposals to
determine whether product offerings have safe features and offer
superior value to students, as well as whether financial institutions
are able to adhere to certain guidelines for transparency and for
marketing practices. The goal of the Safe Student Account Scorecard
will be to provide responsible institutions of higher education with a
standardized format to solicit critical cost and feature information
from prospective financial institution partners. Schools would be able
to incorporate any or all aspects of the scorecard to meet their unique
needs.
For the purposes of soliciting detailed comments from the public on
a scorecard, the Bureau drafted a sample version based on the FDIC's
Model Safe Accounts Template.\22\ A sample Safe Student Account
Scorecard is available at http://www.consumerfinance.gov/students/request-for-information-regarding-an-initiative-on-safe-student-banking/.
The FDIC's template describes ``electronic, card-based accounts
that limit acquisition and maintenance costs. Transaction accounts are
checkless, allowing withdrawals only through automated teller machines,
point-of-sale-terminals, automated clearinghouse pre-authorizations,
and other automated means.'' The Bureau recognizes that the FDIC's
template was not developed specifically for accounts to be utilized by
students enrolled in institutions of higher education. In addition, the
template may need to be adapted if institutions of higher education
choose to enter marketing partnerships to offer other types of
accounts.
In developing the draft for comment, the Bureau also considered
public comments and testimony received as part of its 2013 Request for
Information,\23\ as well as public proceedings related to the
negotiated rulemaking held by the U.S. Department of Education.\24\
Below are some general areas for which information is being sought.
Please respond to any or all of the questions below:
1. How can institutions of higher education and students benefit
from soliciting information on the features and cost of financial
products marketed through a partnership with a financial institution?
2. How can the draft scorecard based on the FDIC Model Safe
Accounts template be adapted to meet the needs of this specific market
and to other types of products that institutions of higher education
seek to offer to their students?
3. What are the potential advantages and disadvantages of
separately negotiating arrangements with prospective financial
institutions to market financial products to students, compared to
including these arrangements as part of a broader relationship with a
financial institution encompassing other services?
4. What factors would institutions of higher education consider
when determining whether or not to include additional information on
product features and cost as part of a Request for Proposal?
5. What other information would be useful for institutions of
higher education to solicit from potential marketing partners to assist
them in determining whether financial product offerings are safe and
affordable for their students?
6. What tools or information would be helpful for institutions of
higher education when comparing proposals from potential marketing
partners and selecting the proposal offering the safest, most
affordable products for students?
7. For existing arrangements between institutions of higher
education and financial institutions to market student checking
accounts, prepaid cards, and other financial products, what fees do
students most frequently incur? To what degree do transaction patterns
and fees vary among different student populations? How does this
compare to the frequency of fee assessments on accounts unrelated to
these marketing arrangements?
8. For which student financial products would a Safe Student
Account Scorecard be most useful to institutions of higher education?
\1\ Consumer Financial Protection Bureau, Request for
Information Regarding Financial Products to Students Enrolled in
Institutions of Higher Education, available at http://www.regulations.gov/#!docketDetail;D=CFPB-2013-0003 (Feb. 2013).
\2\ Consumer Financial Protection Bureau, Banking on Campus
Forum, available at http://files.consumerfinance.gov/f/201309_cfpb_banking-on-campus-forum.pdf (Sept. 2013).
\3\ Consumer Financial Protection Bureau, College Credit Card
Agreements: Annual Report to Congress, available at http://files.consumerfinance.gov/f/201412_cfpb_college-card-agreement-report-2014.pdf (Dec. 2014).
\4\ U.S. Gov't Accountability Office, GAO-14-91, COLLEGE DEBIT
CARDS: Actions needed to Address ATM Access, Student Choice, and
Transparency, available at http://www.gao.gov/assets/670/660919.pdf
(Feb. 2014).
\5\ Consumer Financial Protection Bureau, What sunshine for
student financial products can show us, available at http://www.consumerfinance.gov/blog/what-sunshine-for-student-financial-products-can-show-us/ (Feb. 2014).
\6\ National Association of College and University Business
Officers (NACUBO), Students Refunds and Personal Banking at Colleges
and Universities, available at http://www.nacubo.org/Documents/Initiatives/Campus_Card_Survey_Summary_FINAL.pdf (Oct. 2012).
\7\ U.S. Gov't Accountability Office, GAO-14-91, COLLEGE DEBIT
CARDS: Actions needed to Address ATM Access, Student Choice, and
Transparency, available at http://www.gao.gov/assets/670/660919.pdf
(Feb. 2014).
\8\ U.S. PIRG, The Campus Debit Card Trap: Are Bank Partnerships
Fair to Students?, available at http://www.uspirg.org/sites/pirg/files/reports/thecampusdebitcardtrap_may2012_uspef.pdf (May 2012).
\9\ Board of Governors of the Federal Reserve System, Federal
Reserve Board announces civil money penalty and issues cease and
desist order against Cole Taylor Bank, available at http://www.federalreserve.gov/newsevents/press/enforcement/20140701b.htm
(July 2014).
Federal Deposit Insurance Corporation, FDIC Announces
Settlements With Higher One, Inc., New Haven, Connecticut, and the
Bancorp Bank, Wilmington, Delaware for Unfair and Deceptive
Practices, available at https://www.fdic.gov/news/news/press/2012/pr12092.html (Aug. 2012).
\10\ See for example, New York State Office of the Attorney
General, Press Release, Attorney General Cuomo Announces Settlement
with Education Finance Partners Over its Student Loan Practices,
available at http://www.ag.ny.gov/press-release/attorney-general-cuomo-announces-settlement-education-finance-partners-over-its (Apr.
2007).
\11\ Public Law 110-315.
\12\ 20 U.S.C. 1019a.
\13\ Public Law 111-24.
\14\ 15 U.S.C. 1637(r).
\15\ Consumer Financial Protection Bureau, College Credit Card
Agreements Database, available at http://www.consumerfinance.gov/credit-cards/college-agreements/.
\16\ Consumer Financial Protection Bureau, CFPB Calls on
Financial Institutions to Publicly Disclose Campus Financial
Agreements, available at http://www.consumerfinance.gov/newsroom/cfpb-calls-on-financial-institutions-to-publicly-disclose-campus-financial-agreements/ (Dec. 2013).
\17\ Consumer Financial Protection Bureau, What sunshine for
student financial products can show us, available at http://www.consumerfinance.gov/blog/what-sunshine-for-student-financial-products-can-show-us/ (Feb. 2013).
[[Page 4258]]
\18\ U.S. Gov't Accountability Office, GAO-14-91, COLLEGE DEBIT
CARDS: Actions needed to Address ATM Access, Student Choice, and
Transparency, available at http://www.gao.gov/assets/670/660919.pdf
(Feb. 2014).
\19\ National Association of College and University Business
Officers (NACUBO), Students Refunds and Personal Banking at Colleges
and Universities, available at http://www.nacubo.org/Documents/
Initiatives/Campus_Card_Survey_Summary_FINAL.Pdf (Oct. 2012).
\20\ Ibid.
\21\ Ibid.
\22\ In January 2011, the FDIC published a Model Safe Accounts
Template. The Bureau reviewed this template and the associated
docket of public comments when developing this draft Safe Student
Account Scorecard for use by colleges and universities. Available at
https://www.fdic.gov/consumers/template/background/.
\23\ Consumer Financial Protection Bureau, Request for
Information Regarding Financial Products Marketed to Students
Enrolled in institutions of Higher Education, available at http://www.regulations.gov/#!docketDetail;D=CFPB-2013-0003 (Feb 2013).
\24\ Department of Education, Negotiated Rulemaking 2013-2014
Program Integrity and Improvement, available at http://www.2.ed.gov/policy/highered/reg/hearulemaking/2012/programintegrity.html.
Dated: January 15, 2015.
Christopher D'Angelo,
Chief of Staff, Bureau of Consumer Financial Protection.
[FR Doc. 2015-01492 Filed 1-26-15; 8:45 am]
BILLING CODE 4810-AM-P