U.S. PIRG Urges Further Action on Campus Debit Cards

U.S. PIRG

Washington, DC — U.S. PIRG is urging federal policy makers to clean up the campus debit card marketplace, after an ABC News investigation found that a multimillion-dollar deal between TCF Bank and the University of Minnesota – which offered students checking accounts linked to their campus ID cards – hits students with hidden fees as high as $37 per transaction. 

The ABC News investigation, “Bank pays $34 bounty for new college customers,” also found that the University receives $34 per year for each student who opens a TCF account and keeps their account active.

“While consumer protection isn’t part of the job description for the college administrators negotiating these deals, banks have every incentive to sock student consumers with hidden fees that are hard to avoid,” said Chris Lindstrom, higher education advocate for U.S. PIRG.

Last year, U.S. PIRG released “The Campus Debit Card Trap,” a report detailing the burgeoning campus debit card marketplace. It found that two in five college students across the country now have access to a campus debit card linked to their student ID card—and that some even come preloaded with their financial aid. These types of debit cards are aggressively marketed to students through financial aid disbursement and student identification channels, which are both essential to navigate student life. Some campuses have even consolidated all these functions onto a mobile phone app, making the collusion initially more attractive to students.

In some instances, banks are paying big for the privilege of offering these services to students. A contract between Ohio State University and Huntington Bank includes $25 million in payments to the school over 15 years—a hefty investment for the ability to sock thousands of students with high fees through these checking accounts.

In other arrangements, financial firms like Higher One pay colleges to load student financial aid onto debit/check cards and, in turn, the company socks students with fees to access their aid. In fact, Higher One makes 75 percent of its annual revenue from penalty fees squeezed from students.

The U.S. PIRG report found that students are subject to a number of steep and questionable fees, including a variety of per-swipe fees, inactivity fees, overdraft fees, ATM fees and fees to reload prepaid cards.

The Consumer Financial Protection Bureau is in the midst of investigating these concerns, and is expected to release its findings and policy recommendations later this fall. The U.S. Department of Education has also announced its intent to revisit the rules surrounding financial aid disbursement on campus.

“Policy makers at the federal level have got to step in to clean up the campus debit card marketplace, and fast,” Lindstrom said.

A detailed list of U.S. PIRG’s recommendations for policy makers appears in the report. Top recommendations include eliminating fees for financial aid disbursement cards; increasing transparency of the contracts between banks/financial firms and campuses; and enforcing laws that already exist to protect student consumers.

U.S. PIRG, the federation of state Public Interest Research Groups, is a consumer group that stands up to powerful interests whenever they threaten our health and safety, our financial security, or our right to fully participate in our democratic society.

Note:  This release has been corrected since it was posted on Sept. 5.  The original release incorrectly referred to Higher One’s student financial aid product as a ‘prepaid debit card’ when it is a debit/check card product. Also, the original release incorrectly stated that “Higher One makes 65 percent of its annual profits from penalty fees squeezed from students.” Instead, Higher One made 75 percent of its annual revenues from penalty fees and other fees. We regret these errors.