Is Your College Offering Checking & Pre-paid Accounts with Tricks and Traps?
Published On: January 17, 2015
“Safe Student Account Scorecard” that would help colleges to avoid partnering with financial institutions that offer checking and prepaid accounts with tricks and traps.
Helping a client protect important assets before filing bankruptcy has always been seen as appropriate “pre-bankruptcy planning. To quote Ret. Bankruptcy Judge Sarah Curley “it is malpractice not to provide competent pre-bankruptcy counsel”.
Schools look at students as cash machines.
Consumer Financial Protection Bureau (CFPB) is seeking input on a “Safe Student Account Scorecard” that would help colleges to avoid partnering with financial institutions that offer checking and prepaid accounts with tricks and traps. CFPB discloses that many “colleges make deals with financial institutions, where the college helps with or allows the promotion of credit, debit, or prepaid cards, sometimes endorsed with a college logo or linked to a student identification card. Colleges, either directly or indirectly, typically get a share of the revenue generated from the cards, and financial institutions have access to a new group of consumers.
The CFPB has identified agreements where financial institutions offer royalty payments for use of college trademarks or bonuses based on the number of student account sign-ups. Financial institutions may also offer discounted, or even completely free services, in exchange for marketing access on campus.
The behind the scenes reason for this increased scrutiny is that the bankruptcy trustees and their attorneys are hungry. Bankruptcies are down, but their firm and life style were built on earning a very healthy income. Now they are desperate to keep up that same level of income.
The Credit CARD Act of 2009 (CARD Act) restricted financial institutions from using certain types of credit card marketing practices on college campuses and requires that agreements between credit card issuers and colleges be publicly available. But over the past five years marketing partnerships between colleges and banks have shifted from marketing credit cards to marketing student debit and prepaid cards. This form of marketing has now surpassed marketing student credit cards. Forty percent of college students attend schools with agreements between the college and the financial institution to provide debit or prepaid cards. A CFPB analysis of one university system revealed that the school-endorsed financial product received the highest adoption by students receiving financial aid.
Once again banks and lending institutions look for ways to lock in a student to life changing debts. Please use your common sense when borrowing money with the “hope” that you can repay it in the future. This is gambling with your future and the financial stability of your family.
By Diane Drain|Published On: January 17th, 2015|Last Updated: May 29th, 2022|
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