Published: July 2015

It’s time to end predatory college-bank partnerships

The Department of Education’s proposed changes to "Cash Management" rules governing student financial-aid disbursements are a strong step towards curbing the misuse of the federal student-aid system — specifically college-bank partnerships that aggressively market to students and steer them into high-fee bank accounts.

In a letter to the Secretary of Education, Arne Duncan, Consumer Action joined coalition advocates in supporting the Department’s proposed changes that will restrict the college-bank partnerships that often prove predatory for students. Historically, these partnerships have given banks extensive marketing access to students. In return, colleges receive financial benefits from the bank — a share of the fee revenue, or a bonus per account opened, for example.

Today 40 percent of college students in the country attend a college that has a bank partnership. Throughout what is essentially a sales and marketing process, students may believe that their college has used its market power and knowledge to seek out the best accounts on their behalf. However, it is often the case that better accounts are available with no overdraft fees and plenty of features that might be attractive to students. But the deceptive marketing practices and exclusive college-bank deals suppress potentially healthy competition.

Consumer Action joined coalition advocates in supporting the Department's new rule. Instead of selling banks exclusive marketing access to their students, colleges should be impartially helping students identify the best accounts on the market. The Department of Education’s proposed rules are a partial step toward that goal.

Lead Organization

Americans for Financial Reform (AFR)

Other Organizations

AFL-CIO | American Federation of Teachers | Americans for Financial Reform | California Reinvestment Coalition | California State Student Association | Center for Responsible Lending | Consumer Action | Consumer Federation of America | Consumers Union, policy and action from Consumer Reports | NAACP | National Association of Consumer Advocates | National Consumer Law Center, on behalf of its low income clients | New Jersey Citizen Action | Ohio Student Association | One Wisconsin Now | Oregon Student Association | Public Citizen | Project on Predatory Student Lending, Legal Services Center of Harvard Law School | Reinvestment Partners | Student Debt Crisis | Student Labor Action Project | The Institute for College Access and Success | United States Student Association | U.S. PIRG | Veterans Education Success | Woodstock Institute | Young Invincibles

More Information

For more information, please visit AFR's website.

Download PDF

It’s time to end predatory college-bank partnerships   (cashmanagementsign-on_final.compressed.pdf)

 
 

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