Financial Protection

We ask the FDIC to investigate BankMobile(BM), First Carolina bank partnership to add junk fees on campus.

Along with  the Student Borrower Protection Center, PIRG called on the Federal Deposit Insurance Corporation, North Carolina Department of Justice, and North Carolina Office of the Commissioner of Banks to intervene in the proposed “Deposit Processing Services Agreement” (DPSA) between First Carolina Bank and BM Technologies. It’s our latest effort to rein in high swipe fees in the college market. Letter to the three regulators. Our previous report explains:   “Banks offer financial incentives for college administrations to recommend debit accounts to financial aid recipients and the wider campus community.”

As the letter outlines, the advocates’ concerns include that the DPSA stands to impose a junk fee bonanza on students and small retailers in college towns, that BMT faces managerial deficiencies and a legacy of predatory conduct that render it unlikely to meet prevailing standards for banks’ third-party risk management, and that FCB is likely unready for the massive influx of novel out-of-state business that the partnership would involve. The advocates urge regulators to initiate careful scrutiny of First Carolina and BM Technologies rather than approve the DPSA.

We’ve opposed the anticompetitive practices of Visa and Mastercard for years through comprehensive swipe fee reform. The effort has long been championed by Senator Dick Durbin (IL). This effort by BM (formerly Bankmobile) is focused on the college market only and appears designed as a “fintech” scheme to arbitrage or take advantage of interchange or swipe fees that are up to three times higher for Durbin-exempt institutions than for non-exempt ones; BMT’s existing disclosures show that the company extracts $185 in revenue per year per account. Activists scholars, and lawmakers have long complained for years that these high swipe fees are set anticompetitively, that they diverge from the true cost of facilitating payments, and that they lead to both higher prices for consumers and diminished profits for small retailers. Why expanding debit card routing to credit card markets is a good idea.

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