October 13, 2022
Colleges that partner with financial service providers like banks appear to be promoting accounts to students that are more expensive than other options available in the marketplace, the Consumer Financial Protection Bureau said in an annual report to Congress on Thursday.
Institutions are also likely failing to meet U.S. Department of Education requirements about sharing information on student account options and disclosing their deals with companies, the CFPB found.
The U.S. Department of Education issued guidance Thursday making clear that colleges are responsible for seeing that campus financial products uphold students’ best interest. That includes reviewing whether financial account fees are consistent with or below market rates. The department said it will ramp up oversight, in part by tracking new data and adding staff.
Colleges frequently make deals with banks and other financial service providers that want to sign students up for accounts. These arrangements have drawn scrutiny from watchdogs and policymakers for years amid concerns they incentivize colleges to steer students toward costly financial services they don’t need.
Only a handful of financial services providers account for a large share of the arrangements. Just one, BankMobile, was responsible for nearly 70% of accounts offered under these deals, the CFPB found.
BankMobile, or BM Technologies, is a publicly traded digital banking company. It did not immediately respond to a request for comment Thursday.
These deals can in some cases bring in millions of dollars in revenue for colleges. Arizona State University was among institutions receiving the largest payments from a financial partner. MidFirst Bank paid it $2.8 million in 2020-21, the CFPB found. An estimated 46% of Arizona State undergraduates had accounts at the bank.