Whether some financial institutions and colleges may be steering students to more expensive financial products is among the questions raised about some marketing deals between colleges and financial institutions in a report to Congress made public Thursday by the federal consumer financial protection agency.
According to the Consumer Financial Protection Bureau (CFPB), its report on terms and fees associated with banking products marketed in partnership with colleges to students also highlights a lack of transparency in the arrangements schools have made with financial institutions.
Bureau Director Rohit Chopra, in a statement, said that while colleges have bargaining power to obtain superior terms and pricing for students, the report found that many college-sponsored financial products cost students more than accounts that are readily available on the open market.
The CFPB said its report – its 12th annual report to Congress in fulfillment of the CFPB’s requirements, pursuant to the Credit Card Accountability Responsibility and Disclosure Act (CARD Act) on college banking and credit card agreements – holds four key findings:
- Financial services providers and their partner schools appear to offer and promote more costly products to students than are otherwise available in the market;
- One entity (not identified by name in the report) dominates the market for financial aid disbursements, providing nearly 70% of the accounts offered in partnership with schools—and imposes surprise monthly fees;
- Many students are directed to lists of account options that do not appear to meet Department of Education requirements;
- Many agreements between financial institutions and colleges do not appear to be posted prominently as required.
The agency said its review included data on 11 account providers, including non-bank financial service providers, banks, and credit unions offering more than 650,000 student accounts in partnership with 462 institutions of higher education during the 2020-2021 award year.