Bloomberg said that financial companies are worried about the probability of the adoption of a rule courtesy of the US Department of Education regarding banking services offered to college students. The proposal would set to ban majority of the service fees in banking accounts of college students.
Senior counsel David Pommerehn at the Consumer Bankers Association said that should the service fees on all types of student accounts be banned, the banks' marketing deals with the schools will no longer be economical. He said in an interview, "There's not a whole lot of financial incentive to stay in it anyway."
Bloomberg said universities and colleges had long been involved in multimillion-dollar marketing deals with firms including Wells Fargo & Co, US Bancorp and Huntington Bancshares Inc. Under the agreements, schools sell the right to offer checking accounts and debit cards to enrolled students. Lawmakers and consumer groups have criticized the deals for years, and said that the contracts expose students to higher fees for activities like cash withdrawals and overdrafts.
The draft distributed by the education department indicated that the objective was to protect students from any costs that are associated with opening, maintaining or closing a "sponsored account," and guarantees that students will not be charged with fees for making at least four withdrawals monthly from any ATM in the state. Bloomberg said that the college demographic had been a strategic market for banks because although they are not lucrative, majority of the customers from this demographic become lifelong customers of the bank with mortgages and investments.
Bloomberg said that the Education Department has been called to act by lawmakers and the Consumer Financial Protection Bureau. The latter was the agency spawned from the 2010 Dodd-Frank regulatory overhaul, and has held a hearing on September 30 on campus financial products that highlighted the potential for abuse.
