Congressional Agency Calls for Clearer Campus Card Guidelines (Feb. 18, 2014)
The Government Accountability Office (GAO) is the latest government agency to scrutinize the increasingly popular campus-based debit and prepaid cards. The GAO—the audit, evaluation and investigative arm of the U.S. Congress—released a study last week urging greater oversight of fees attached to such cards and clearer rules governing card providers. The GAO found that 11 percent of U.S. colleges and universities had agreements to provide debit or prepaid card services to their students as of July 2013, and that most of those schools enabled students to have financial aid disbursements loaded onto the cards.
While the GAO found that the fees attached to those cards were generally comparable to traditional debit and prepaid cards, the report noted that two large providers of campus-based cards charged a fee for PIN-based transactions—a charge typically not included for mainstream debit and prepaid cards. The report also noted that while Dept. of Education guidelines require schools to ensure “convenient access” to fee-free ATMs for students receiving financial aid payments on the cards, “the agency has not yet specified what constitutes this level of access.” Finally, the GAO cited instances in which schools appeared to encourage students to enroll for a particular campus-based card, rather than presenting neutral information about payment options.
As a result of its findings, the GAO encouraged Congress to consider requiring that financial firms providing debit and prepaid card services to colleges make their agreements available for public review. The agency also called on the Dept. of Education to clarify its ATM access rules for campus-based cards, and to set guidelines requiring schools and card providers to present neutral information to students about their options for receiving aid funds.
Campus-based prepaid cards recently have come under scrutiny by regulators and politicians. Last October, a group of Congressional Democratic leaders sent a letter to several major banks and a financial aid disbursement company, expressing concern over financial arrangements between colleges and banks. The previous month, the Consumer Financial Protection Bureau (CFPB) held a public forum examining how banks serve college students with financial products, such as checking accounts, debit cards and prepaid cards.