America’s colleges have more work to do when it comes to protecting students from so-called “junk fees,” the Consumer Financial Protection Bureau (CFPB) said Thursday (Oct. 13).
A new CFPB report looks at the terms and fees connected to banking products marketed to students by financial institutions (FIs) in partnership with colleges. The bureau said its findings raise questions about whether these deals comply with U.S. Department of Education rules.
According to a CFPB news release, the report also focuses on “a lack of transparency in the arrangements schools have made with financial institutions.” It has led the Department of Education to issue guidance to schools on requirements for college-sponsored banking deals and commit to more oversight on this issue.
Read more: CFPB to Probe College Loan Programs
“While colleges have substantial bargaining power to obtain superior terms and pricing for their students, we find that many college-sponsored financial products cost students more than accounts that are readily available on the open market,” said CFPB Director Rohit Chopra.
He added that the report suggests “there is more work to do to ensure that students are not steered into school-endorsed products with junk fees.”
The report said a small number of FIs work with colleges to dispense financial aid and provide financial products to students, often claiming to support students’ financial health.
“However, the products marketed to students are often more costly than what students might otherwise find in the market,” the news release said.
Earlier this year, the CFPB announced it would investigate for-profit colleges, which extend private loans to students, while also updating its exam procedures by adding a section for institutional student loans.
The exam procedures will include information about practices that CFPB examiners will review, such as placing restrictions on enrollment, withholding transcripts, improperly accelerating payments, failing to provide refunds, and maintaining improper relationships with lenders.
The CFPB said it was concerned about the borrower experience with institutional loans, with for-profit college students historically facing high-interest rates and harsh collection practices.