Deals between colleges and banks for co-branded financial services don’t necessarily lead to better deals for students who sign up for accounts the partnerships offer, U.S. Consumer Financial Protection Bureau said Monday.
“College affinity products generally do not appear to have more attractive features compared to other student checking products,” said Rohit Chopra, assistant director and student loan ombudsman at the agency.
The CFPB and U.S. lawmakers have scrutinized so-called affinity agreements between colleges and financial services providers over the possibility that students may be paying unnecessarily high fees.
A group of lawmakers including Sen. Elizabeth Warren, a Massachusetts Democrat, last week demanded that a group of banks including U.S. Bancorp, PNC Financial Services Group and SunTrust Banks produce information about their agreements with colleges to encourage students to use their products.
The lawmakers described payments or revenue-sharing colleges sometimes receive from the service providers as “kickbacks.”
Higher One Holdings, a New Haven, Conn.-based company that provides financial services to students, also received a request for information from the lawmakers.
Banks say that they have an interest in treating student customers well so they come back for other services, such as auto loans or mortgages, later in life. Anne Gross, vice president for regulatory affairs at the National Association of College and University Business Officers, said revenue-sharing arrangements exist with about 15 educational institutions.
Affinity agreements between a financial services provider and a college or university typically involve debit cards – often stocked with aid money – that students can use for regular expenses. For example, U.S. Bancorp has an agreement with North Carolina State University to provide a debit card called “Wolfpack One” after the school’s mascot.
Chopra said research on competing products concluded that unaffiliated banks sometimes offer better terms and conditions than the ones that partner with colleges.