Why it matters
Under a new proposal from the Consumer Financial Protection Bureau (CFPB), financial companies would be graded on a “scorecard” for their offerings to students. The “Safe Student Account Scorecard” would provide colleges and universities information on the product features and fees when selecting a financial company to partner with, the Bureau explained, although use of the scorecard would not be mandatory. The proposed format includes four sections with information on features provided without charge and details about fees charged for services, as well as information about the financial institution’s marketing practices. “The scorecard is not designed to be a set of minimum standards – schools would be free to modify it to meet their unique needs,” CFPB director Richard Cordray said in a press call about the proposal. “But by increasing transparency this scorecard would represent important progress on safe student accounts.” Although not mandatory, it is highly likely that schools would refuse to do business with financial companies not receiving a high grade from CFPB on the scorecard.
In 2009 the Credit CARD Act imposed restrictions on financial institutions from using certain types of marketing practices on college campuses and required that agreements between credit card issuers and colleges be publicly available. Because of these changes, the nature of offerings from issuers to college students has changed over the last five years, the CFPB said, increasingly focusing on debit and prepaid cards.
To help colleges and universities compare proposals from financial institutions, the Bureau developed a “Safe Student Account Scorecard” to evaluate the student costs and benefits for products that are offered, including fees, features, and marketing practices.
Four sections highlight important considerations, the Bureau said. First, the financial institution would disclose information on product features such as fees and costs (including the amount of any fees), access to mobile banking and electronic statements, balance inquiry fees, or a charge to reload a prepaid card. Nonstandard fees and the availability of in-network ATMs must also be described.
Marketing practices are discussed in the second section. Financial institutions would be asked to explain “how they ensure that a college has the ability to approve certain marketing materials using its brand or logo” as well as how they “ensure that students receive objective and neutral information on their choices.”
In the third section the CFPB provided a format for colleges to request information about the cost of Safe Student Checking and Prepaid Accounts, including how much the financial institutions receive for each account that is opened, how much the institution receives for each transaction with its financial product, and how much financial support the institution provides to the school.
The final section is an explanation of the annual summary of fees charged to account holders at the college. The number of student account holders the previous year, the average and median fees paid by a student account holder per year, the three most frequently incurred fees per year, and the average and median fees paid by a student for each fee imposed would all be provided by the financial institution.
Comments on the draft scorecard will be accepted by the Bureau until March 16.
To view the CFPB’s sample scorecard, click here.
To read the comments from the Federal Register, click here.