Waters Takes Action to Protect Students from Predatory Debit Card Accounts
At a time when student debt has reached record levels, and studies show those with excessive debt may be unable to gain access to credit for important purposes like a home purchase, Congresswoman Maxine Waters (CA-43) is taking steps to ensure that predatory financial products are not taking additional dollars out of the pockets of our nation’s graduates.
In the midst of graduation season Waters, the Ranking Member of the Financial Services Committee, has joined with lawmakers in the House of Representatives and the U.S. Senate to spearhead critical legislation that will protect students from unfair banking practices involving campus-sponsored financial products.
Specifically, the measure seeks to end financial arrangements between colleges and banks that steer financially-strapped students into fee-laden debit cards that increase the costs of college significantly. It does so by ending conflicts of interest and kickbacks between financial institutions and schools, providing much-needed transparency over campus-sponsored financial products and preserving the integrity of federal student aid programs.
“Our nation’s next generation of leaders is already burdened with excessive education debt, making it harder for them to contribute to our economy and society,” said Waters. “Predatory practices that increase the already exorbitant cost of college are not reflective of our national priorities. This legislation would ensure students, many already drowning in debt, can no longer fall victim to unscrupulous practices that drain important federal financial aid through hidden charges, increased fees and other predatory behavior.”
Banks and financial institutions have long sought to forge partnerships with colleges and universities as a way to gain access to young consumers. However, in order to access this lucrative market, some banks use tactics such as financial payouts to colleges that recommend specific financial products. Recent investigations into campus banking have revealed that too often, many banks and financial firms are using questionable methods to steer students into accounts that are endorsed by their college, and carry high fees. In some cases, this leads students to be guided into needlessly expensive accounts that end up chipping away at their federal student aid and making college more expensive—while schools receive multi-million dollar kickbacks from the banks.
The House bill, entitled Curbing Abusive Marketing Practices with University Student Debit Cards Act (CAMPUS Debit Cards Act) would extend protections previously enacted by Congress that eliminated high-cost credit cards and high pressure marketing tactics on campus. This bill would extend these crucial protections to checking accounts, debit cards, and other financial products, helping safeguard the $150 billion in federal student loans and grants students receive each year.
Waters joined Representative George Miller (D-CA) and 60 additional cosponsors to introduce the measure in the House. The Senate measure, known as the Protecting Aid for Students Act for 2014 is led by Senators Tom Harkin (D-IA) and Senators Dick Durbin (D-IL) and Elizabeth Warren (D-MA).
The legislation is supported by many consumer advocacy and student organizations, including the Center for Responsible Lending, the United States Student Association, the Public Interest Research Group, Consumers Union, and Young Invincibles.
In September 2013, Waters led a call for big bank CEOs to explain student debit card deals with colleges, asking bank executives to explain the scope of any such arrangements, how much money the deals pay to colleges, and how much in fees are charged to students.
A summary of the legislation is available here.