Democratic lawmakers including Senator Elizabeth Warren today demanded that eight U.S. banks produce information about agreements they may have with colleges to encourage students to use their products.
These lucrative deals are great for banks and great for colleges, but students can get hurt when they are steered into financial products that carry high fees, the group of lawmakers wrote in the letter to Citigroup Inc., Wells Fargo & Co. and six other banks.
They cited a 2012 report by the U.S. Public Interest Research Group, a consumer organization that said more than 9 million students are at risk of being nickeled and dimed by fees stemming from bank-college partnerships. It also said banks pay colleges kickbacks to get the deals.
The letter came from lawmakers including Warren, of Massachusetts, the former head of the Consumer Financial Protection Bureau; Representative Maxine Waters, of California, the ranking member of the Finance Committee; and Representative George Miller of California, the top Democrat on the House Education and Workforce Committee.
The letter also went to chief executives of U.S. Bancorp, PNC Financial Services Group Inc., SunTrust Banks Inc., TCF Bank, Huntington Bancshares Inc. and Commerce Bancshares Inc. Higher One Holdings Inc., a New Haven, Connecticut-based company that provides financial services to students, was also sent a copy of the letter.
The debit-card or prepaid-card programs cited by PIRG are popular with students because of the benefits they provide, Terry Maher, a partner at Baird Holm LLP and general counsel to the Network Branded Prepaid Card Association, told Bloomberg BNA after the report was released.
We are strong proponents of clear and transparent fee disclosures and strong consumer protections, he said. We do not have a major disagreement on those issues.
Student financial products will be the topic of a Sept. 30 Washington forum planned by the consumer bureau. CFPB Director Richard Cordray and the bureaus student loan ombudsman, Rohit Chopra, will be among the speakers, according to a bureau news release.