Abusive College-Bank Marketing Agreements to be Reined In
Final rules issued today from the Department of Education will protect college students from being pushed into high-fee bank accounts by their colleges, banks and bank affiliates. The rules will ban overdraft and other bank fees on some accounts jointly marketed by these financial entities. It will also require that the accounts be marketed more fairly.
Maura Dundon, Senior Policy Counsel at the Center for Responsible Lending made the following statement:
The new rules will protect students from being steered by their colleges to into high fee accounts. It is simply unconscionable for colleges to join forces with banks and their affiliates to push students into high-fee bank accounts that siphon away their financial aid money through overdraft fees.
The new rule responds to concerns raised over the past several years about the deceptive and unfair nature of college-bank marketing partnerships.
Typically, a bank and a college will enter into a marketing agreement to allow the bank and its affiliates special, exclusive access to students at key times. Two examples are when choosing where to deposit their financial aid or a student ID card that doubles as a debit card. In return, the college receives some form of a kickback for each student who opens an account.
In the worst cases, the advertising has been designed to trick students into believing that they must open the account to receive their financial aid.
This is a big deal. Forty percent attend a college with a marketing partnership in place. Our research found that overdraft fees alone could amount to over $700 a year for some of these students.
Student aid should not be bait for bank overdraft fees. The rule will prevent the student loan system from turning into a marketing platform for banks and their affiliates to gouge students.
For more information, or to arrange an interview with a CRL spokesperson on this issue, please contact Charlene Crowell at Charlene.Crowell@responsiblelending.org or 919-313-8523.