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CFPB: Student Banking Products Have Unusually High Fees

college student with laptop

American college students’ first bank accounts might end up being their worst bank accounts.

A recent report by the Consumer Financial Protection Bureau (CFPB) finds that many college-sponsored credit cards and deposit accounts have higher fees and worse terms and conditions than comparable products.

“Many students get their first credit card or deposit account when they enroll in college, and banks know that consumers are unlikely to move to a different provider once a product is integrated into their financial life,” CFPB Director Rohit Chopra said in a Tuesday (Dec. 19) news release.

 “Schools should take a hard look at the fees and terms of the products they pitch to their students and alumni.”

According to the report, the CFPB has identified college-sponsored deposit accounts with fees higher prevailing market rates, which institutions are required to consider under Department of Education rules designed to guard students’ interests.

The CFPB notes that many colleges offer sponsored and co-branded financial products to students, who may be likely to accept their school’s recommendation of a bank account or credit card upon arrival on campus.

This means that “colleges and their financial institution partners may not face competitive pressure to lower fees or provide low-cost products,” the bureau said.

“These arrangements can be lucrative for schools, as financial institutions pay tens of millions of dollars every year to colleges and universities, including flat-fee marketing deals and per-signup kickbacks,” said the release.

Earlier this year, the CFPB said it was investigating the tuition payment plan agreements some students make with their colleges.

As PYMNTS noted at the time, many of these plans lack consistent disclosures and include confusing repayment terms, meaning students run the risk of missing payments, accruing debt and paying late fees.

Research by PYMNTS has shown that college-aged consumers are often in tougher economic circumstances, with 66% of them living paycheck to paycheck.

“Primarily, this demographic often lacks essential financial education,” PYMNTS wrote earlier this year. “Gen Z exhibits the lowest levels of credit education, according to FICO, with 29% of individuals in this age group unaware of or even lacking a credit score.”