NAICU Washington Update

CFPB Finds Fault with Agreements Between Institutions and Financial Companies

October 21, 2022

The Consumer Financial Protection Bureau (CFPB), in its annual report to Congress regarding the contractual agreements between institutions of higher education and financial companies, found that these agreements may be causing students to face unnecessary and burdensome financial challenges. 

Among the findings from the CFPB report: 
  • Financial services providers and their partner schools appear to offer and promote more costly products to students than are otherwise available in the market;
  • BM Technologies, Inc. (also known as BankMobile and BMTX) dominates the market for financial aid disbursements, providing nearly 70% of the accounts offered in partnership with schools—and imposes surprise monthly fees;
  • Many students are directed to a list of account options by financial companies that are not presented in a neutral manner as required by the Department; and 
  • Many agreements between financial companies and institutions of higher education do not appear to be posted prominently on the institutions’ websites as required by the Department.
The Department of Education also issued a Homeroom Blog post and a Dear Colleague letter in response to the CFPB report to ensure that colleges offering financial products meet the requirements of cash management regulations. The Department has indicated that over the coming months, it will plan to bring on additional staff to increase oversight of these contractual agreements, improve the reporting process for institutions on these banking partnerships, and review contracts as part of the program review process. It will also subject institutions to potential punitive measures if they are not properly abiding by the cash management regulations, and it will look to the CFPB for information on emerging trends in the financial market and prevailing market rates that could inform which practices are in the best financial interest of students.

The CFPB’s review included data on 11 account providers offering more than 650,000 student accounts in partnership with 462 institutions of higher education during the 2020-2021 Award Year. The account providers included non-bank financial service providers, banks, and credit unions.

This is the 12th annual report to Congress in fulfillment of the CFPB’s requirements, pursuant to the Credit Card Accountability Responsibility and Disclosure Act (CARD Act).  The report reviews agreements and data covering the over 1.2 million student checking and credit card accounts that are governed by partnerships between institutions of higher education and financial services providers and highlights market trends and possible risks. 

Consumers, including college students, can submit complaints about credit card, prepaid, or debit accounts, and about other products and services, by visiting the CFPB’s website or by calling (855) 411-CFPB (2372). 
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