The Consumer Bankers Association (ABA) made a statement before the Senate Banking Committee that warned that the DOE’s Negotiated Rulemaking Proposal to amend Title IV fund disbursement rules would significantly harm banks’ ability to serve students and limit students’ access to banking services. In its statement, the CBA questioned the DOE’s authority under the statute to even issue the proposal, and added that, if passed, the DOE’s proposal would so restrict bank accounts connected to financial institutions that student accounts would be eliminated–even those not connected to financial aid disbursement. The statement cautioned that students will bear the brunt of the proposal’s negative consequences, forcing them to “turn to loosely regulated, less secure, less convenient and more costly options.”
Meanwhile, Senators Mike Crapo (R-Idaho) and Robert Menendez (D-N.J.) wrote letters to DOE Secretary Arne Duncan regarding their views on the proposal. Sen. Crapo’s concerns about the proposal mirrored those of the CBA. Conversely, Sen. Menendez’s advocated for strong consumer protections, focused on fee disclosures, fee prohibitions and fair choice, as well as issues addressing potential conflicts of interest. Sen. Menendez, whose letter specifically mentioned that prepaid cards “are not yet required to have the same protections as debit cards,” urged the DOE and CFPB to require “Regulation E protections if a card is lost or stolen and FDIC or NCUA insurance.” It important to note that prepaid cards that receive Title IV funds, per DOE regulations, are required to have FDIC Insurance, Regulation E protections, and student/parental consent.
The ABA’s statement follows a broad industry coalition (CBA, ABA, FSR, and NBPCA) opposed to the DOE’s proposal in its current form, including Rep. Blaine Luetkemeyer’s (R-Mo.) recent letter that was firmly against the DOE’s proposal and which was signed by more than 40 other lawmakers from both sides of the isle. Sen. Menendez’s views contrasted, raising concerns about hidden fees and lack of consumer protections for student cards.