[Federal Register Volume 82, Number 136 (Tuesday, July 18, 2017)]
[Rules and Regulations]
[Pages 32762-32766]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-15077]


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DEPARTMENT OF EDUCATION

34 CFR Part 668

RIN 1840-AD14
[Docket ID ED-2015-OPE-0020]


Final Format and Summary of Responses to Request for Information 
Regarding Disclosures for Student Financial Accounts; Announcement of 
Applicable Dates

AGENCY: Office of Postsecondary Education, Department of Education.

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ACTION: Responses to request for information.

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SUMMARY: On May 9, 2017, the Department of Education (Department) 
published in the Federal Register a Request for Information (RFI) to 
solicit ideas and information related to the major features and types 
of commonly assessed fees that postsecondary institutions 
(institutions) must disclose under Department regulations with regard 
to each of the institution's Tier 1 (T1) or Tier 2 (T2) arrangements. 
The Department announces the final format for these disclosures. To 
allow institutions sufficient time to adopt the final format, if they 
elect to do so, the Department is allowing additional time--until 
January 1, 2018--for institutions to comply with the applicable 
disclosure requirements.

DATES: The Department is allowing additional time--until January 1, 
2018--for institutions to comply with the requirements in 34 CFR 
668.164(d)(4)(i)(B)(2).

FOR FURTHER INFORMATION CONTACT: Ashley Higgins, U.S. Department of 
Education, 400 Maryland Avenue SW., Room 6W234, Washington, DC 20202. 
Telephone: (202) 453-6097 or by email: [email protected].
    If you use a telecommunications device for the deaf (TDD) or a text 
telephone (TTY), call the Federal Relay Service (FRS), toll free, at 1-
800-877-8339.

SUPPLEMENTARY INFORMATION: The Secretary received 10 written responses 
to the RFI and is using this feedback to announce the final format, 
content, and update requirements that institutions may choose to follow 
to satisfy the requirements of Sec.  668.164(d)(4)(i)(B)(2) with 
respect to the major features and assessed fees associated with their 
T1 and T2 arrangements. The Secretary thanks the commenters for their 
suggestions to improve the information presented to students. 
Furthermore, due to the delay in releasing the final format and update 
requirements, we are allowing institutions additional time--until 
January 1, 2018--to comply with the requirements in Sec.  
668.164(d)(4)(i)(B)(2).
    We also remind institutions that the Consumer Financial Protection 
Bureau's (CFPB's) short-form template was not drafted to implement the 
Department's cash management regulations; accordingly, institutions 
using that template should not regard it as authorizing T1 or T2 
arrangements that impose any fees otherwise prohibited under Sec.  
[thinsp]668.164(e) or (f), as applicable.
    Analysis of Comments and Changes: An analysis of the comments and 
of any changes to the format, content, and update requirements since 
publication of the RFI follows.

General Comments

    Comments: Several commenters suggested that the disclosure should 
read ``ask your school (or school's business office) about other ways 
to receive federal student aid'' instead of ``ask the financial aid 
office about other ways to receive your money.'' The commenters 
indicated that this is because the financial aid office is not 
responsible for disbursing aid.
    Discussion: We thank the commenters for noting this distinction. 
While we do not intend to change the wording of the message on the 
example disclosure, we note that an institution is free to replace the 
wording ``the financial aid office'' with more appropriate contact 
information, as long as the contact information provided corresponds to 
someone directly employed by the school.
    Changes: None.
    Comments: One commenter indicated that simply stating that students 
have other ways to receive their money at the top of the form is 
insufficient and that the examples of a paper check and direct deposit 
should also be included in the example disclosure. The commenter also 
suggested that more specific contact information for the institution be 
included in the statement and that the language be bolded.
    Discussion: We note that, under Sec.  668.164(d)(4)(i)(B)(2), the 
institution is required to list the major features and commonly 
assessed fees associated with each T1 and T2 account as part of the 
selection menu. Section 668.164(d)(4)(i)(A)(2) requires that the 
student's options for receiving direct payments are described and 
presented in a clear, fact-based, and neutral manner. Section 
668.164(d)(4)(i)(B)(1) requires that institutions must present 
prominently as the first option, the ability to receive student aid 
funds via direct deposit to a preexisting financial account belonging 
to the student. Because all of these items are required to be a part of 
the selection menu, we believe it is unnecessary to add them to the 
disclosures. We do not believe that more specific contact information 
for an institution is necessary, since it is highly likely that the 
student will be able to find such information on their own once they 
understand which office they need to speak to within their institution. 
We also do not believe it is necessary to bold the message at the top 
of the disclosures because the format makes the relevant information 
sufficiently clear.
    Changes: None.
    Comments: Several commenters expressed concerns that having 
institutions maintain the account disclosures in their selection menus 
will be administratively burdensome and instead suggested that it would 
be less burdensome to simply include a link to the disclosures in the 
selection menu. One commenter noted that there is a risk that schools 
will lack the capacity to update their disclosures in a timely manner 
should the fee schedule change. That same commenter also pointed out 
that, should students choose to open a bank account through the 
selection process, they will be directed to a disclosure page during 
the account-opening process.
    Discussion: We disagree with the commenter. Under Sec.  
668.164(d)(4)(i)(B)(2), an institution must list the major features and 
commonly assessed fees associated with each T1 and T2 account as part 
of the selection menu (80 FR 67125, 67160). We believe that this 
approach is a more effective way of delivering important consumer 
information at the time a choice is being made, rather than simply 
including a link to a set of disclosures. Therefore, we require the 
disclosures to be visible within the selection menu.
    Changes: None.
    Comments: One commenter took issue with the phrase ``[y]our funds 
are/are not eligible for Federal Deposit Insurance Corporation/National 
Credit Union Administration (FDIC or NCUA) insurance,'' included on the 
disclosure. The commenter indicated that such a statement is 
incomplete, and could put institutions and financial account providers 
at risk since there are limits to FDIC and NCUA coverage, using the 
example that funds are only insured up to a certain amount and there 
are certain other limitations.
    Discussion: We disagree that including a binary indicator of 
whether an account carries FDIC or NCUA insurance creates risk for 
either an institution or its partner financial account provider. The 
extent to which such coverage insures an accountholder's funds is 
immaterial to whether such coverage exists. In the RFI, we proposed 
that this statement be included because some types of accounts, 
especially prepaid accounts, do not have any FDIC or NCUA insurance. We 
continue to believe that this information is critical for students 
prior to opening an account and believe its inclusion will not create 
confusion for students or risk to institutions and financial account 
providers. However,

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we are clarifying the disclosure language by replacing the phrase 
``funds are/are not'' and with ``account is/is not.''
    Changes: We are removing the phrase ``funds are/are not'' from the 
section of the disclosures addressing FDIC and NCUA insurance and 
replacing it with ``account is/is not.''
    Comments: Several commenters suggested that the Department place 
more emphasis on overdraft fees, with some asking that overdraft fees 
be included in the top-line disclosure items. Some commenters also 
suggested the use of bold font for a proposed top-line overdraft 
disclosure. One commenter argued that this will help students who may 
be comparing fees between two programs if a campus offers both T1 and 
T2 accounts. One commenter also argued that giving more prominence to 
overdraft fees is important, since data show that students remain 
particularly vulnerable to incurring overdraft fees. Another commenter 
suggested that the statement on overdrafts be more expansive, arguing 
that a more prominent display of these fees will help institutions to 
compare financial programs in connection with their contracting 
decisions. Another commenter suggested that the disclosures include a 
statement that overdraft features are optional on T2 accounts, stating 
that accountholders who choose overdraft features are more likely to 
incur high fees.
    Discussion: In the process of drafting the RFI, we considered 
including overdraft fees as a top-line disclosure item. However, we 
determined that it would be unnecessary to include overdraft fees in 
such a manner because financial account providers under T1 arrangements 
are unable to charge such fees and because, in the event that they are 
charged by T2 providers, they would almost certainly be included in the 
additional two fees listed in the disclosures. However, after reviewing 
the comments, we are concerned that this approach may result in a 
disclosure that unintentionally downplays a fee that is not only 
typically expensive compared to other fees that students may be 
charged, but can quickly compound itself when an account is in a 
negative balance. We are persuaded by the comments arguing that 
overdraft fees should result in a more prominent display on the 
disclosures. We also agree that such a placement may help students who 
are comparing two different types of accounts, even if the fee is not 
charged. However, we decline to add a statement that overdraft features 
are optional as we believe it may confuse students. We also believe 
that bold font for the top-line item is unnecessary, given its already 
prominent placement in the revised disclosure template.
    Changes: We have added ``overdraft'' fees as a top-line disclosure 
item. Financial account providers operating under T1 arrangements (and 
any other account providers that do not charge an overdraft fee) can 
simply place an ``N/A'' in that box. As a result of this change, we 
have also removed the language that states ``[y]ou may be offered 
overdraft features. Fees could apply. *OR* No overdraft/credit 
feature'' from the disclosures.
    Comments: A few commenters stated that institutions should also 
disclose the number and location of surcharge-free ATMs.
    Discussion: While we thank the commenters for their interest in 
making sure that students are well informed about their account 
options, we disagree. The short-form disclosures are meant to be easily 
understandable by students, and adding the number and locations of each 
networked ATM is likely to greatly increase the length and complexity 
of the disclosures. We are also concerned that adding this feature may 
increase the burden on institutions and financial account providers 
without a commensurate benefit to students.
    Changes: None.
    Comments: One commenter suggested including money transfer or 
account closing fees associated with a student account, stating that 
this could disproportionally impact students who are dissatisfied with 
their accounts.
    Discussion: The disclosures cannot capture every fee charged by a 
financial institution, and the fees specifically identified by the 
commenter have not been a significant source of complaint during or 
since the rulemaking. However, should any money transfer or account 
closing fee result in a significant share of revenue for a financial 
institution, this will be captured in the section listing additional 
fees. Because of this, we believe that it is unnecessary to add these 
types of fees to the disclosures.
    Changes: None.
    Comments: One commenter suggested removing some of the top-line 
disclosure items and replacing them with the high-revenue fees listed 
later in the disclosures, arguing that because some of these fees have 
been disallowed through regulation, they should not be included in the 
short-form disclosures.
    Discussion: We disagree. Leaving fees that have been disallowed by 
regulation, such as overdraft fees for T1 accounts, in the short-form 
disclosures allows students to more easily compare T1 and T2 accounts 
with other bank accounts.
    Changes: None.
    Comments: In the RFI, we asked commenters to tell us whether there 
is a preferred start date for the requirement to include the two 
additional fee types that generated the highest revenue from account 
holders during the previous 24 months. One commenter responded that 
there is no need to delay the disclosure of the high-revenue fees and 
that financial account providers can furnish this information as soon 
as they begin using the disclosure template.
    Discussion: We agree with the commenter. If an institution chooses 
to use this format, it must include all required elements no later than 
January 1, 2018 (or earlier at the institution's discretion). Because 
this was a requirement already proposed as part of the RFI, we are not 
making any changes as a result of this comment.
    Changes: None.
    Comments: One commenter suggested that account providers include 
the average or median annual cost for students who choose a particular 
financial account in the disclosures.
    Discussion: Sections 668.164(e)(2)(vii)(B) and (f)(4)(iv)(B) 
already provide for the release of the average and median costs 
incurred by students who choose to use an account offered under a T1 or 
T2 arrangement. We do not believe that the value of adding this item to 
the template outweighs the costs of requiring institutions to meet 
duplicative requirements and of making the template more complicated.
    Changes: None.
    Comments: One commenter suggested that the form should include the 
relationship between the institution and financial account provider.
    Discussion: Sections 668.164(e)(2)(vi), (e)(2)(vii)(A), 
(f)(4)(iii)(A), and (f)(4)(iv)(A) already provide for the release of 
the complete contract between the parties and information regarding the 
total consideration for the most recently completed award year, 
monetary and nonmonetary, paid or received by the parties under the 
terms of the contract. We do not believe that the value of adding this 
item to the template outweighs the costs of requiring institutions to 
meet duplicative requirements and of making the template more 
complicated.
    Changes: None.
    Comments: One commenter suggested that we add a statement to the 
disclosures to clarify that the fee schedule only applies as long as 
the account holders are enrolled students at

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the institution at which they initially opened the financial account.
    Discussion: We thank the commenter for the suggestion. However, the 
disclosure describes only fees and other information for enrolled 
students, so we do not believe this additional statement provides 
necessary information.
    Changes: None.
    Comments: Several commenters suggested using the format developed 
by the Pew Charitable Trusts for bank accounts, while using the 
proposed format only for prepaid accounts. Commenters argued that since 
this format has already been widely adopted by banks, it would be easy 
for institutions to comply with the regulations. Commenters also 
expressed their belief that the proposed disclosure format is more 
appropriate for standard checking accounts. One commenter stated that 
it may be confusing for students if the disclosures use terms common to 
prepaid cards to describe checking accounts.
    Discussion: We agree with the commenter that the format developed 
by the Pew Charitable Trusts may be an appropriate format to use within 
the student choice menu. Nothing in the format set forth in this 
document prevents institutions from using these types of disclosures if 
they wish. However, institutions that choose to use Pew's format must 
ensure that they comply with the additional specific requirements for 
accounts offered under T1 and T2 arrangements. For example, under Sec.  
668.164(d)(4)(i)(A)(1) schools must include a written statement that 
students do not have to accept the account and may recommend that 
students ask about other ways to receive their Federal student aid. 
Another example is the requirement that, for accounts offered under T1 
arrangements, the institution must also state that a student 
accountholder may access his or her title IV, HEA program funds in 
whole or in part up to the account balance via domestic withdrawals and 
transfers free of charge, during the student's entire period of 
enrollment following the date that such title IV, HEA program funds are 
deposited or transferred to the financial account, as required under 
Sec.  [thinsp]668.164(e)(2)(v)(C).
    Changes: None.
    Comments: Several commenters requested a delay of the deadline for 
compliance. Suggested dates included December 31, 2017, and January 1, 
2018.
    Discussion: We agree with the commenters that July 1, 2017, is 
impracticable for institutions to adapt their selection menu to include 
this format. As a result, the Secretary is allowing additional time--
until January 1, 2018--for institutions to comply with the requirements 
in Sec.  668.164(d)(4)(i)(B)(2) regarding disclosures of an account's 
fees and major features.
    Changes: Institutions now have until January 1, 2018, to include in 
their selection menu the disclosures regarding major features and fees 
required by Sec.  668.164(d)(4)(i)(B)(2), whether through use of the 
disclosure template described in this document or in another manner.
    Final Format of the Disclosures: The final suggested format of the 
disclosures is as follows:
[GRAPHIC] [TIFF OMITTED] TR18JY17.005


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Description

     The institution's disclosures must list the following 
fees: Periodic fees, per purchase fees (including point-of-sale fees), 
ATM withdrawal fees, cash reload fees, overdraft fees, ATM balance 
inquiry fees, customer service fees, and inactivity fees. These fees 
are referred to as ``static fees'' because all institutions using the 
Secretary's format must list these fees in the disclosures, even if the 
amount of the fee is zero or the fee relates to a feature that is not 
offered as part of the specific account. In cases where the amount of 
any fee could vary, the disclosures must show the highest amount the 
account provider may charge for that fee, followed by a symbol, such as 
an asterisk, linked to a statement explaining that the fee could be 
lower depending on how and where the account is used. The asterisk 
would be included, for example, if point-of-sale fees differ depending 
on whether the cardholder is required to provide a PIN or signature. In 
cases where a static fee is not imposed, the institution may 
demonstrate that the fee is not applicable by placing ``N/A'' or an 
equivalent designation in the appropriate field.
     The disclosures must include the number of fee types the 
accountholder may be charged under the specific account program, 
excluding those fees that are either disclosed on the form or in close 
proximity as described below.
     The disclosures must also list the two additional fee 
types, if any, that generated the highest revenue from account holders 
during the previous 24 months excluding static fees, any purchase 
price, any activation fees and any fee types that generated less than 
five percent of the total revenue from accountholders, as well as the 
amounts of such additional fees. The two additional fee types would be 
determined for the specific financial account program or across 
programs with the same fee schedule. Institutions must ensure that the 
financial account provider reviews their fee revenue periodically and 
that they assist the institution in updating the disclosures if needed.
     The disclosures must include statements regarding FDIC/
NCUA insurance and a link to the terms and conditions of the account.
     The disclosures must include a written statement that 
students do not have to accept the account offered under a T1 or T2 
arrangement and may recommend that students ask about other ways to 
receive their Federal student aid.
     In close proximity to the disclosures, though not 
necessarily within the disclosures, the institution must disclose the 
financial account provider's name; the name of the account; for T2 
accounts, any purchase price for the account (such as a fee for 
acquiring an access device or a replacement for an access device); and 
any fee for activating the account. If the financial account is a T1 
account, the institution must also use this space to disclose that a 
student account holder may access his or her title IV, HEA program 
funds in part and in full up to the account balance via domestic 
withdrawals and transfers free of charge, during the student's entire 
period of enrollment following the date that such title IV, HEA program 
funds are deposited or transferred to the financial account, as 
required under Sec.  [thinsp]668.164(e)(2)(v)(C). We also remind 
institutions that T1 accounts may not charge fees for opening or 
activating the financial account or initially receiving or activating 
an access device, nor for overdrafts or fees assessed on point-of-sale 
transactions.
    Accessible Format: Individuals with disabilities can obtain this 
document in an accessible format (e.g., braille, large print, 
audiotape, or compact disc) on request to the program contact person 
listed under FOR FURTHER INFORMATION CONTACT.
    Electronic Access to This Document: The official version of this 
document is the document published in the Federal Register. Free 
internet access to the official edition of the Federal Register and the 
Code of Federal Regulations is available via the Federal Digital System 
at: www.gpo.gov/fdsys. At this site you can view this document, as well 
as all other documents of this Department published in the Federal 
Register, in text or Portable Document Format (PDF). To use PDF you 
must have Adobe Acrobat Reader, which is available free at the site.
    You may also access documents of the Department published in the 
Federal Register by using the article search feature at: 
www.federalregister.gov. Specifically, through the advanced search 
feature at this site, you can limit your search to documents published 
by the Department.

    Dated: July 13, 2017.
Betsy DeVos,
Secretary of Education.
[FR Doc. 2017-15077 Filed 7-17-17; 8:45 am]
 BILLING CODE 4000-01-P