Students pay higher overdraft and other fees if they attend universities that have struck marketing agreements with financial institutions, the Consumer Financial Protection Bureau said in an internal report released late last week by a consumer advocacy group.
The report raises concerns about whether bank and credit union contracts with colleges are in the best financial interest of students. It also sheds light on particular institutions that charged high fees.
For example, Wells Fargo charged students the most of all those with college campus marketing agreements — an average of $46.99 per account per year, while banks without such deals charged students an average of $11.93 in fees, according to the report.
Other institutions also charged much higher fees, including University of Kentucky Federal Credit Union, which charged $37 per account annually and TCF Financial, which charted an average of $27.27, the report said.
The CFPB suggested the marketing deals were allowing financial institutions to drive up fees.
“The bureau and other government entities have expressed concern over the relationship between revenue sharing provisions in contracts and fees charged to student accountholders,” the report said. “These provisions raise questions about potential conflicts of interest, including whether revenue sharing encourages higher-fee financial products that crowd out competition from providers of accounts for which student accountholders would avoid high fees ... [or] would pay less in fees.”
Jim Seitz, a Wells spokesman, denied any linkage between the marketing agreements and higher fees, saying students do not pay higher fees for services offered through a campus card program.
“We feel strongly that our products and services are designed to serve the students' best interest,” Seitz said.
TCF said there are no monthly service fees associated with campus banking products unless a customer overdraws their account. In addition, students automatically are opted out of TCF's overdraft protection service, said Mark Goldman, a TCF spokesman. "They must choose to opt-in to the service and only if they overdraw their account would they incur a fee," he said.
The report was released Friday by the consumer advocacy group Allied Progress under a Freedom of Information Act Request.
The report found a total of 573 colleges with marketing agreements struck with 14 banks and credit unions. Roughly 1.3 million students collectively paid $27.6 million in account fees to banks that had college marketing agreement during the 2016-17 academic year.
The CFPB identified 116 colleges that reported being paid $16.7 million by banks and credit unions to promote financial accounts in 2017. Three banks led the payouts to colleges: PNC Bank paid $7.6 million, U.S. Bank $3.2 million and Wells Fargo $2.1 million, the report said.
Another 457 colleges received no compensation from financial firms in 2017.
Roughly 839,000 students at those colleges without marketing agreements paid an average of $11.93 in fees in 2017, while roughly 482,000 students who used accounts at colleges with marketing agreements paid $36.52 on average in fees per account last year.
"This proves that banks pay lots of money for exclusive advertising and access to students, and once they get access they charge overdraft fees and account fees," said Linda Jun, policy counsel at Americans for Financial Reform.
The CFPB's review of account terms and conditions in the marketing agreements found that colleges that did not have such pacts with banks “do not appear to charge overdraft fees,” while for those with marketing agreements “most account providers charge overdraft fees.”
“Colleges paid by account providers to promote accounts typically charge overdraft fees,” the report found. “Student accountholders at colleges paid to promote accounts paid three times more in account fees under these agreements, on average.”
The report noted that colleges may understate the total financial contributions received during the lifetime of a marketing agreement. Many such marketing agreements include a large upfront contribution when the agreement is first signed.
In August, the report
While the CFPB has jurisdiction over large banks, the Department of Education has jurisdiction over colleges.
In 2015, the Education Department adopted a rule that requires colleges conduct reasonable due diligence to ensure that fees imposed under marketing agreements are “consistent with or below prevailing market rates.”
"These colleges are making money off of these agreements and it’s a huge question whether the schools pay attention to whether students are getting ripped off," Jun said.
Banks and credit units may pay colleges based on the number of students who open and use a checking or prepaid account, including a fixed amount for each student or annual payments based on the total number of students using an account.
Last year was the first year in which data on college marketing agreements by banks was supposed to be made publicly available, but the CFPB did not release the report. In addition, without any year-over-year analysis, it can be hard to identify trends.
