UCF still searching for new banking partner

College students have been hunted for years. Campuses house a coveted population of consumers new to the financial world, who are often naive.

Where credit card companies once thrived off of deals attached to high fees, banks and debit cards have taken over.

 The U.S. Public Interest Research Group Education Fund held a conference call with student journalists across the country on Sept. 17 to review its recent report, The Campus Debit Card Trap.

 “A well-structured debit card program could provide benefits,” said Rich Williams, U.S. PIRG higher education advocate and co-author of the report.

“But with many programs providing little choice and high fees, students might not be getting the best deal.”

 With the Credit CARD Act of 2009, credit card companies were prohibited from giving away freebies on campus, and issuers who were marketing on campus needed to disclose all of that information to a government database. These restrictions do not apply to debit cards.

 “There is more than $1 trillion in current outstanding student loans nationally, more than credit cards and auto loans,” said Anne Johnson, director of Campus Progress, a nonprofit organization that promotes progressive political and social policy and supports student activists.

 A lot of this debt is disbursed to students through debit cards connected to financial institutions. Higher One, used by Valencia College, is the largest and oldest of these institutions. It makes 80 percent of its total revenue from overdraft and other transaction fees, Johnson said.

 As UCF searches for a new banking partner, after deciding not to extend its contract with SunTrust, students’ campus financial options are in limbo. A partner was supposed to be announced by Aug. 17, but UCF has yet to decide.

 “We are seeking a partner that is willing to waive monthly fees and offer financial education classes to our students about topics such as how to build and manage credit,” said Chad Binette, associate director of UCF News & Information.

 If UCF accomplishes this goal, it will be setting an example that the U.S. PIRG urges other colleges and universities to follow.

 “We think that campus administrators have the ability and responsibility to leverage their power in the marketplace and to make sure students are getting good deals,” said Rohit Chopra, student-loan ombudsman at the Consumer Financial Protection Bureau.

 The report stated that state higher-education funding has declined and many campuses are looking to increase revenues. Financial institutions often provide a way to do that. During the process of sealing a partnership deal, banks may offer colleges significant financial benefits. For example, Huntington Bank paid $25 million to Ohio State University to co-brand and link its checking accounts to student IDs.

 “These relationships create, at least the appearance of, a conflict of interest,” Johnson said. “Many schools may be tempted to choose the arrangements that give them the most money, rather than the arrangement that gives students the best deal.”

 Chopra offered tips for students signing up for new bank accounts. Don’t cave in to pressure, he said. You can’t be required to use a specific bank or card to obtain your federal student loans or scholarship funds. And just because a bank is marketing on campus, doesn’t mean they have the best deals for you.

 Several nontraditional banking options, such as credit unions and online banks, may be the best fit for a student, Chopra said. Shop around. Avoid fees.

 “Some financial institutions won’t charge you for using any ATMS and some will automatically reimburse you for fees charged for using an out of network ATM,” Chopra said.

 Many online banks also have apps for students to remotely deposit their paper checks, as well as other student-friendly features that make waiting in line at a branch unnecessary.

 “It’s mostly the banks that have predatory practices,” Williams said. “What we were seeing is not the first time banks have targeted colleges as gatekeepers to this prized group of young consumers that they always go after.”

 “They did it with credit cards, they did it with student loans and, let’s be honest, they have more money than God, and they will find the weak link.”

 UCF may take an additional four to five months to establish a new banking partnership, Binette said.

 The U.S. PIRG urged students to be aware of fees and terms that are often written in fine print and to report any problems they may have with their checking accounts on CFPB’s website. They also have a Student Banking 101 guide at www.ConsumerFinance.gov/Students if students want to learn more.