Banks Say Deals With Colleges Could End If U.S. Rule Adopted

May 14, 2014
credit card news
If the U.S. Department of Education imposes a rule to ban most account fees, banks say their marketing deals with universities would no longer be feasible.

Under these arrangements, universities sell the right to offer checking accounts and debit cards to students. However, lawmakers and consumer groups argue that the agreements subject students to unreasonably high fees for cash withdrawals, overdrafts, and other activities.

Under a draft proposal from the department, banks would have to guarantee students at least four free withdrawals per month from any cash machine in the state and eliminate any costs associated with opening, maintaining, or closing these "sponsored accounts." The rule has been delayed due to debate over the definition of sponsored account -- with consumer groups insisting that all accounts students open with banks that have marketing agreements with their school should be covered by the rule, and banks contending that it should apply only to accounts opened to channel federal financial aid.

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