The Trump administration hid a report about campus financial products. Here’s why it matters.

Casey Quinlan

Casey Quinlan Reporter, ThinkProgres

The Trump administration hid a report on fees for debit cards and other financial products marketed on university campuses that revealed Wells Fargo charged fees several times higher than its competitors.

News of the report, which was produced by the office once led by Seth Frotman, the Consumer Financial Protection Bureau’s (CFPB) former student loan watchdog who resigned in August in protest of Trump’s policies, was first reported by Politico on Tuesday, after the outlet filed a Freedom of Information Act request.

Advocates for campus financial product oversight said the report reinforced concerns about the administration’s lack of interest in upholding regulations of campus accounts that appear to be working. They also argued that the report signals the administration’s willingness to do further damage to oversight of campus financial products and student aid, consistent with its current agenda of emphasizing student responsibility, while allowing private institutions to profit off of students without accountability.

The report looked at 14 companies’ agreements with more than 500 colleges and found that Wells Fargo charged an average fee per account of nearly $50, the highest of all other companies. In so doing, it is likely that the bank violated Education Department rules requiring higher education institutions to promote affordable products to their students. Though the bank only provided about 25 percent of the accounts, it collected more than half of all student fees. The compensation Wells Fargo paid to colleges was about $2.1 million.

In his August resignation letter, Frotman wrote of the unpublished report, “For example, late last year, when new evidence came to light showing that the nation’s largest banks were ripping off students across the country with legally dubious account fees, Bureau leadership suppressed the publication of the report by Bureau staff.” Frotman added that “the current leadership” of the bureau “has abandoned its duty to fairly and robustly enforce the law.”

The report identified 116 colleges that together received $16.6 million in payments from account providers during the 2016-2017 federal student aid award year, ThinkProgress confirmed after Allied Progress, a consumer watchdog organization, shared the report it received it as part of the same FOIA request

The report also included information about the Federal Student Aid’s work on the NextGenPayment Card Program Pilot, an FSA and financial institution co-branded fee-free debit card that, once launched, students will be able to use like they would any debit card. According to the Federal Register, participants for the pilot will be chosen from multiple schools by the end of the month and the pilot will run until 2020. The program will essentially allow the government to see how students spend their money. 

The CFPB’s Office for Students and Young Consumers addressed the report to Wayne Johnson, who is in charge of the department’s prepaid card initiative, and who devoted much of his career to credit card and banking firms before starting his own private student loan company. Mick Mulvaney, former director of the Office of Management and Budget and former acting director of the CFPB, had restructured the agency over the past several months, firing every member of its advisory board in June, part of series of actions that ultimately led to Frotman’s resignation. A new CFPB director, Kathy Kraninger, was confirmed by the Senate last week.

Colleen Campbell, associate director of postsecondary education at the Center for American Progress (CAP) said it seemed “exceptionally odd” that the administration hid the report. As the report explains, at most colleges, a majority of students didn’t pay any fees when using sponsored accounts at colleges, adding that the department’s implementation of new standards for what is called “cash management” appeared to be working.  (ThinkProgress is editorially independent of CAP.)

“The Department of Education has more information than it used about how financial agreements that are going on between financial institutions and colleges and there has been this significant reduction that students are being charged,” Campbell said. 

Despite the high fees from providers like Wells Fargo and the fact that colleges are raking in millions, Campbell said “that’s way down from earlier in the decade when the cash management regulations were not implemented.” 

In 2015, after reports revealed that providers and schools were telling students to sign up for college card accounts to receive federal financial aid and that aid recipients were charged “onerous, confusing, or unavoidable” fees, the department moved to amend regulations to ensure students “do not incur unreasonable and uncommon financial account fees” and “are not led to believe they must open a particular financial account to receive their Federal student aid.”

According to the report, some account fees and providers “still pose risks to student consumers,” however, and that nearly one in 10 consumers had 10 or more overdrafts each year and on average paid $196 in overdraft fees alone. The report also noted that revenue sharing agreements in contracts and fees charged to students “raise questions” about conflicts of interest.

Campbell said administration’s interest in the NextGenPayment Card Program Pilot should raise red flags about the department’s interest in upholding cash management regulations and ensuring students are protected from financial institutions in general. The NextGenPayment Card will allow FSA’s financial institution of choice to market products to students, which means the institution  could market itself to millions of student aid recipients if the program were to be expanded.

While it is unclear why the administration hid the report, the report doesn’t appear to fully support the NextGenPayment Card idea, since it would suggest continued regulations of these products, not necessarily the introduction of this card.Campbell told ThinkProgress that instead of spending money on the pilot implementation, the department could spend it on cash management regulations that are clearly working.

Campbell has said that if FSA has aggregated data on student spending, “it could twist [it] into a justification to reduce access to or funding for federal aid programs” and FSA has explained that it would use data for monitoring of compliance.

“It [the pilot program] would provide the implicit endorsement of financial institutions to students and would put them in the hands of a financial institutions that can market products at us as long as we hold the account,” Campbell said.

Although the Obama administration also considered a card like this at one time, it was ultimately shut down, she explained.

Some consumer groups have voiced skepticism about the pilot program as well. Lauren Saunders, associate director of the National Consumer Law Center, toldInside Higher Education in January, “It could be that there are companies that would find this attractive, not so much for the card itself but for the opportunity to pitch other products or try to develop brand loyalty from customers.”

Ultimately, the suppression of the report and the administration’s decision to pursue the NextGenPayment Card Program Pilot signal Trump’s lack of interest in protecting students from financial institutions, Campbell explained. Education Secretary Betsy DeVos recently said, in a speech in which she mentioned NextGen initiatives, “Students — our human capital — must equip themselves to be responsible consumers of education with a serious commitment to their own success. They need to have the best possible tools, data, advice, and support. And then they need to understand the implications of their decisions.”

“There are folks at the Department of Education and Republicans in Congress who are absolutely fine with putting the responsibility on students and letting financial institutions off the hook,” Campbell said. “It’s part of a larger agenda to restrict aid to students and allow private groups to profit off of it.”


Reposted from ThinkProgress

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