WASHINGTON, DC: On Friday, the Department of Education (ED) released a previously suppressed February 2018 report by the Consumer Financial Protection Bureau (CFPB) revealing that students are paying millions of dollars in dubious fees on debit cards. These cards were made available to students under deals struck between their college and banks, which in some cases paid the school for these exclusive marketing opportunities. In those situations, students paid three times as much in fees than their peers at other institutions.
Most of the banks that operate these campus debit accounts — 14 in total — had zero or very low fees, demonstrating that rules adopted by ED in 2015 after a 2012 USPIRG report The Campus Debit Card Trap have been protecting students. But Wells Fargo, which has faced a series of enforcement actions for a wide range of financial improprieties — including a $185 million fine over “fake accounts” (2016) and a $1 billion fine over unfair auto repossessions and mortgage practices (2018), charged college students an average of $47 in fees on these debit accounts.
“Assuming some students pay little to no fees, then that means that a subset of already cash-strapped students are being charged hundreds of dollars in dubious fees,” said Kaitlyn Vitez, higher ed campaign director for USPIRG.
Wells Fargo held a quarter of all student accounts in the study, but their student card-holders racked up half of fees nationally, according to the report. “That’s clearly not in students’ best interests. The cash management rules were designed to protect students from these shadypractices,” said Vitez.
The government only released the report after multiple FOIA requests from reporters and advocacy groups who were tipped off about the report’s existence by former CFPB officials such as Seth Frotman. Frotman, the CFPB ombudsman, quit in August, citing the suppression of this report by Mulvaney and other Trump allies in his resignation letter. Frotman’s office had prepared the report to advise ED as it prepared for a pilot NextGen debit card pilot, which would roll out these debit cards at a national scale to disburse federal student aid.
“It’s shameful that we had to wait a year after this report was written for it to see the light of day,” said Vitez. “The CFPB and ED sat on this report for nearly a year, and watched as another first year class of students signed up for these dangerously expensive accounts. Students deserve better. We need to be enforcing the rules that are already on the books before we dive head first into a national debit card system.”