WASHINGTON (2/18/14)--Credit unions generally charge lower rates and fees for their card services than do other financial institutions that offer such products to college students, a new U.S. Government Accountability Office study has found.
The study--"College Debit Cards: Actions Needed to Address ATM Access, Student Choice, and Transparency"--reviewed information on fees for similar checking accounts from large national banks and credit unions. The credit union information was drawn from the Credit Union National Association's 2013-2014 Fees Report. CUNA was also interviewed by GAO for the report.
The GAO study found at least 852 schools, representing 11% of U.S. colleges and universities, had agreements to provide debit or prepaid card services to their students as of July 2013. Most of these agreements offered students the ability to receive federal student aid and other payments on a card, the GAO said.
The GAO found that "fees charged by college card providers generally were comparable with those for similar products provided by banks, although some college card fees were slightly higher than those of credit unions."
And, according to the report on college card providers, some college providers went significantly outside the bounds of regular fees: two large providers charged a fee for card purchases using a personal identification number rather than a signature. Mainstream debit cards typically do not charge this fee, the GAO said.
One card provider, Higher One, settled Federal Deposit Insurance Corp. allegations that unfair and deceptive practices by the firm resulted in consumers paying higher fees. That settlement was reached in 2012.
Concerns noted in the GAO report include a lack of clear standards for what constitutes "convenient access" to surcharge-free ATMs or bank branches for students receiving federal student aid payments.
Increased transparency for college card agreements could help ensure that the terms are fair and reasonable for students, and the agreements are free from conflicts of interest, the report added. "Schools may have incentives to influence student choice because some receive payments from card providers based on the number of card accounts or transactions, leading some consumer advocates to question whether schools always act in their students' best interests," the report said.
CUNA regulatory staff said the GAO study could lead to future policy changes by financial regulators.
For the full GAO report, use the resource link.