The release in May 2012 of a U.S. Public Interest Research Group report drew public interest in debit card practices on college campuses. The report acknowledged that a well-structured debit card program can provide benefits, but it claims these arrangements may also subject students to high fees, which can consume the resources they need for education expenses.
In response to the continued public interest in student debit cards, as well as to the growth in recent years of campus-based banking options for students, NACUBO recommends to colleges and universities some best practices based on the association’s survey (conducted in July 2012) of student debit card options on college and university campuses.
Upon the early-January release of the guidance, NACUBO President and CEO John Walda remarked, "Higher education institutions are constantly exploring ways to offer improved service to students and their parents, as well as finding cost savings for the institution, and campus debit cards have evolved to provide an administratively efficient, cost-effective, customer-oriented product. At the same time, colleges and universities need to ensure that students’ consumer interests are protected as they shift more financial transactions
to third parties."
Survey Identifies Opportunities
NACUBO’s student debit card survey found that, of the institutions responding, 26 percent reported that they contract with a third-party vendor to process credit balance refunds; a third of those that do not are considering doing so in the future. Only 12 percent indicated that they have a relationship with a bank, which is not involved in the credit balance refund process, but allows students to tie bank accounts to the institution’s primary campus identification (ID) card. However, nearly 14 percent of institutions that do not have an existing
banking–ID card relationship are considering it for the future.
NACUBO’s survey also found that many schools use a competitive bidding process, and are already making the effort to negotiate good terms for students, be it for processing refunds or for arranging campus card-affiliated personal banking choices.
Need for Direction
Recognizing the need for best practices to be developed and shared broadly, NACUBO worked on guidance details developed with significant input from its recently established Student Financial Services Council. This voluntary group of NACUBO members hails from business offices at colleges and universities across the country and across sectors.
Following are the group’s ideas for safeguarding student finances for campuses offering student debit card options:
- Keep students first. In ongoing efforts to hold down tuition and administrative expenses, college administrators seek cost savings in a number of ways, including automating manual processes, contracting with private operators for support functions, and establishing new revenue streams. Institutions should put students’ interests at the forefront, making business decisions to enhance services available to students—and not doing so at their expense.
- Encourage students to use financial institutions. Many students enrolling for the first time at a college or university have not yet established personal checking or savings accounts. However, those with bank accounts can typically better manage their money, do not have to carry large amounts of cash, and can benefit from the convenience of debit cards and transaction records. Additionally, most bank accounts are insured and offer fraud protection. Therefore, institutions should encourage students to use financial institutions.
- Offer choices. Students have the right to choose their banking relationships, and this should be unambiguous in campus communications, which should also clearly state that students who already have accounts can use them. Some students may not have or be eligible for a traditional bank account, so they may prefer a campus-affiliated debit card option. Institutions should ensure that students have sufficient information available to allow them to be informed consumers.
- Encourage electronic refunds. Electronic transactions have become the norm in all aspects of consumer finance—from government payments to retail transactions—because they are faster, safer, less expensive, and more convenient. Schools should encourage students to receive their refunds electronically.
- Utilize a competitive process and limit exclusivity. The financial services arena is a fast-changing world for both the industry and consumers, with new options regularly emerging in the marketplace. Students and institutions should not be limited by outmoded choices. When seeking a vendor for financial services, institutions should use a competitive selection or bidding process. Institutions should also limit contracts to no more than five years.
- Engage students in the vendor selection process. Students are directly affected by campus contracts with financial institutions for student services, but are not always part of the decision-making process when a vendor is selected. Institutions should encourage student involvement in the process, which can include focus groups, representation on a selection committee, or consultation through student government.
- Comply with federal and state regulations. Colleges and universities take seriously their compliance with the U.S. Department of Education’s regulatory and administrative requirements for the Title IV federal student aid programs. Institutions should take steps to ensure that administrators, staff, and vendors comply with all applicable federal and state regulations.
- Negotiate low- or no-fee options and convenient services for students. Just as colleges and universities strive to provide high-quality academic experiences for their students, they must ensure that school-sanctioned services are also good consumer values. For example, school-endorsed financial institutions should provide adequate ATM access on campus or ensure that banking facilities are readily accessible on or near campus, offer low-cost student account options, educate students to be informed consumers of financial services, and publish clear and transparent fee schedules.
Examples of fees and services institutions should pay particular attention to include:
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- Account fees—set-up, requesting a card, monthly service, minimum balance.
- Spend fees—making a credit card or debit transaction at a point of sale.
- Cash fees—ATM fees, available surcharge-free networks, cash back at point of sale.
- Deposit fees—depositing money by ATM, ACH (automated clearinghouse), direct deposit, teller.
- Help fees and services—online help, voice help, live agent and/or teller options, balance inquiry.
- Caution fees—inactivity, replacement, overdraft.
- Bill payment options and fees—online pay anyone.
- Avoid unscrupulous marketing. Institutions should use great discretion when agreeing to a communication plan to ensure that students are presented with a fair explanation of services and not with misleading, biased, or aggressive marketing schemes.
- Make contracts transparent. Institutions should publicly disclose the terms of any agreements with third parties issuing debit cards to students.
NACUBO CONTACT Liz Clark, director, congressional relations, 202.861.2553@lizclarknacubo