Banking and Finance Law Daily Democratic senators ask Education Secretary to ensure college debit-card pilot program safeguards
Monday, March 11, 2019

Democratic senators ask Education Secretary to ensure college debit-card pilot program safeguards

By Thomas G. Wolfe, J.D.

Several Senate Democrats have sent a letter to Education Secretary Betsy DeVos, voicing their concerns about the lack of consumer safeguards in the agency’s debit-card pilot program for college students receiving federal aid, and asking the Education Secretary to respond to their queries.

Senators Bob Menendez (D-NJ), a senior member of the Senate Banking Committee, Elizabeth Warren (D-Mass), a senior member of the Health, Education, Labor, and Pensions Committee, and Richard Blumenthal (D-Conn) have jointly submitted a letter to U.S. Department of Education Secretary Betsy DeVos, expressing their "strong concerns" regarding the Education Department’s "Payment Vehicle Account Program Pilot," which is intended to "allow federal aid recipients at participating colleges the ability to open an account, and use a debit card, that is co-branded by Federal Student Aid (FSA) and a financial services institution." In their letter, the senators recognize that the Department is "pursuing a financial product with lower fees for student aid recipients," but the senators are "alarmed by the message the card sends to students that their spending habits are going to be monitored by the federal government, that the Department is essentially selling its services to corporate partners, and that the Department will have unprecedented access to student spending data" under the pilot program. Moreover, to "safeguard students’ privacy and financial choices," the Senate Democrats pose 13 questions to the Education Secretary, and request a response "no later than March 27, 2019."

In their March 8, 2019, letter, the senators assert that, given the Trump administration’s "clear record of prioritizing the interests of financial institutions over the needs of our nation’s students, we have concerns regarding the Department’s proposed debit card program."

Senators’ concerns. Among other things, the senators state that they are troubled by the debit-card pilot program’s apparent endorsement of an applicable financial institution and the financial institution’s marketing access to "potentially millions of students." College students "should not be directed toward a financial product by the government; instead, the government should be protecting students, not selling a relationship to financial institutions," the letter asserts.

According to the senators, the Department’s "purported purpose for collecting aggregate student spending information is to monitor for ‘compliance.’ However, it is unclear what problem the Department is trying to solve, or what type of compliance it can monitor with such data." Along these lines, "it is inappropriate for the Department to collect merchant category codes on student spending behavior, and the Department should not request, collect, or analyze such information," the senators maintain. Further, instead of "creating a massive new government program with significant risks for students, the Department must demonstrate that it has pursued alternative enforcement options," the letter contends.

Questions posed. Against this backdrop, Menendez, Warren, and Blumenthal pose 13 questions to Secretary DeVos, and request a response by March 27. Among other things, the senators are interested in knowing:

  • how the Department currently selects institutions or financial arrangements to enforce the cash-management regulations;
  • how the Department works with the Consumer Financial Protection Bureau to enforce the cash-management regulations;
  • whether the Department has requested the CFPB to provide public annual reports on campus card-account fees;
  • what problems the Department has identified in current disbursement practices that would require the development of the "Payment Vehicle Account Program Pilot";
  • which consumer-protection laws the Department believes apply to the debit-card pilot program;
  • what information the Department is looking to acquire by "receiving aggregate reports on student spending behaviors";
  • the level of detail to be reported in the aggregate data received by the Department;
  • whether the aggregate reports on student spending would be shared outside of the Department;
  • how the Department will ensure that no conflicts of interest are present in the agreements made under the debit-card pilot program;
  • how the Department will ensure that no data-sharing will occur between the vendors for the pilot program and student-loan servicers and other FSA contractors;
  • what restrictions will be placed on financial institutions participating in the pilot program, especially concerning the charging of any fees after students leave school;
  • what type of disclaimers the Department plans on providing to ensure that "no implied endorsement of a financial partner’s other products, services, or practices is conveyed by the pilot"; and
  • how the Department will ensure that the privacy of pilot participants will be protected in the "MyStudentAid app or any other electronic payment platform," and ensure that student "location information" will not be tracked.

MainStory: TopStory BankingFinance CFPB CreditDebitGiftCards FedTracker Loans Privacy

Back to Top

Interested in submitting an article?

Submit your information to us today!

Learn More
Banking and Finance Law Daily

Banking and Finance Law Daily: Breaking legal news at your fingertips

Sign up today for your free trial to this daily reporting service created by attorneys, for attorneys. Stay up to date on banking and finance legal matters with same-day coverage of breaking news, court decisions, legislation, and regulatory activity with easy access through email or mobile app.

Free Trial Learn More