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Department reminds institutions about rules related to debit and prepaid cards
October 20, 2022
Schools that offer campus debit and prepaid cards to their students through arrangements with financial institutions must comply with regulatory obligations in overseeing those arrangements.
In an October 13 Dear Colleague Letter, the Department reminded schools that have agreements with financial institutions to offer financial account products to students, such as debit or prepaid cards, must comply with regulations.
The agreements must:
- Ensure student options for receiving credit balance payments are described and presented in a clear, fact-based, and neutral manner.
- Disclose conspicuously contracts establishing an arrangement between the institution and any third-party servicer, including the prior-year compensation and services received by either party under that arrangement.
- Notify the Department of third-party servicer contracts.
- Ensure that the terms of accounts offered under the agreement are consistent with the best financial interests of students.
In some cases, these arrangements are a way for students to receive their Title IV credit balance funds.
In the DCL, the Department said they “are aware of certain practices that may pose risks or excessive costs to students” and “institutions have a responsibility to protect their students when it comes to financial products.”
Also, the Consumer Financial Protection Bureau (CFPB) released a report earlier this month detailing findings on college banking agreements related to campus debit and prepaid cards.