For years the federal government has voiced their disapproval of the way the relationship between the financial industry and higher education institutions target students. Your BBB® has learned the Consumer Financial Protection Bureau (CFPB) has proposed the Safe Student Account Scorecard to help protect students and their financial future.
The scorecard would be made available to universities and it would allow them access to information regarding fees, features, and sales tactics before partnering with the financial institution.
“An important issue for young people is how best to manage their money while they are still in school,” CFPB Director Richard Cordray says in a statement about the initiative. “Because of the influence schools may have on the financial products students choose, we are working to arm them with the information they need to negotiate safe and affordable products for students.”
Usually, universities make deals with financial institutions in which the school aids with or permits the promotion of credit, debit, or prepaid cards, sometimes endorsed with a college logo or linked to a student identification card. Through these deals, colleges often receive royalties for allowing the companies to use college trademarks or logos and bonuses based on the number of students who sign up for accounts. A CFPB report from December found that in 2013 schools made over $43 million in royalties and bonuses stemming from these deals. The proposed scorecard would help level the field for all financial institutions that offer affordable products, regardless of their ability to pay schools bonuses or royalties.
The scorecard would allow colleges to easily evaluate costs to students and benefits of products by accessing information about fees, features, and marketing practices.
Specifically, the financial institutions would be asked to provide schools with the following information:
–A clear description of product fees and features
-Full disclosure about the financial institutions’ marketing practices
-How much the financial institution earns from the accounts
-Annual summary of fees
The CFPB will accept consumer input on the draft scorecard until March 16. Consumers wanting to comment on the scorecard initiative can find information on how to do so here.
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