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Proposals to restrict some fees and marketing of campus debit cards

Restrictions ahead for campus debit cards.
Restrictions ahead for campus debit cards.
Wikimedia Commons

Colleges with often criticized campus debit cards may soon be forced to expose their relationships with card providers.

The U.S Department of Education this week distributed a first draft proposal of new regulations on campus debit cards to its members on a rule-making panel. The plan ultimately would prohibit certain fees, restrict marketing activities, and also compel colleges to be open about their relationships with debit card providers. The new plan would have numerous limits imposed on campus debit cards, including student use to access federal aid, and not allowing these cards to charge ATM usage, account maintenance or overdraft fees.

Under the new plan colleges would have to post agreements they have with debit card providers online, and providers would be prohibited from offering cards with an institution’s logo or mascot, a practice known as “co-branding.”

For quite some time consumer advocates and some government watchdogs have wanted many of these changes and more, although the department’s plan would continue to allow revenue sharing agreements and swipe fees.

As expected, the new proposal drew mixed emotions from the rule making panel and the largest campus debit card provider.

Christine Lindstrom, a member of the rule-making panel, who also directs the U.S PRIG’s higher education program said, “I’m happy with this draft proposal as a starting point.” Lindstrom added, “We are moving in the right direction, especially in terms of the bans on some of the most egregious fees and the ban on co-branding of the cards.”

Campus debit card provider Higher One, also represented on the federal Department of Education panel, said the company is still reviewing the proposal.

According to Mark Volcheck, Higher One’s chief executive officer, “At first glance, however, it appears the new rules have the potential to create new barriers for students who want to get their refunds immediately, additional administrative responsibilities for colleges and universities, and increased potential for fraud since paper checks could still be heavily relied upon.”

The education department also circulated or released several other new proposals regarding online education programs across multiple states, state authorization of foreign institutions, how clock hours are converted into credit hours, and rules on just when students are eligible for federal aid for courses they must retake. These proposals will have further consideration when the rule-making panel assembles again next Wednesday.

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