A group of lawmakers is stepping up an examination of the multi-million dollar deals brokered between large banks and the nation's universities after an ABC News investigation found that some of the arrangements may lead to students being saddled with unwanted fees.
"These lucrative deals are great for banks and great for colleges, but students can get hurt when they are steered into financial products that carry high fees," said a letter to the banks signed by U.S. Sens. Richard Durbin, D-Ill.; Elizabeth Warren, D-Mass.; Sherrod Brown, D-Ohio; and U.S. Reps. George Miller, D-Calif.; Maxine Waters D-Calif.; and Peter Welch D-Vt.
The letter was sent to half a dozen financial institutions that are known to have exclusive deals to market their checking accounts and debit cards to students at large universities. It calls on the banks, including Wells Fargo, U.S. Bancorp, SunTrust Banks, Inc., Citigroup, Higher One Holdings, Inc., and TCF Bank, to supply Congress with details about the number of student accounts they carry on their books, the amount of money they pay to universities for exclusive access to students, and any gifts or perks they provide to university officials as part of those arrangements. The letter was sent last week, before the nearly government-wide shut down, which began Tuesday.
Federal officials are increasingly concerned about the burgeoning number of these deals, saying colleges eager for new streams of income may be short changing their students. A study by the Public Interest Research Group last year found that there are now 900 card partnerships between colleges and banks – agreements that could impact more than nine million students nationwide.
The ABC News investigation, which aired on "Good Morning America" last month, focused on the relationship between the University of Minnesota and the Minneapolis-based TCF Bank. Documents obtained by ABC News showed the bank is paying the University of Minnesota more than $1 million a year to help it recruit students as customers, even offering the school bounties of $34 for every student that takes a TCF Bank account.
A stroll around the bucolic Minneapolis campus revealed what that money was buying. Incoming freshmen wore Gopher t-shirts with the bank logo on the back. On one side of the student center, across from restaurants and upstairs from the bowling alley, was a TCF Bank branch. On the other side of building was the office where student IDs, called "U Cards," were dispensed. Some of the staff on hand were actually TCF Bank employees, who encouraged students to merge their student IDs with a TCF Bank debit card, promising "no-fee," "virtually free" checking accounts. Students who agreed to deposit more than $50 were told they would receive a free University of Minnesota sweatshirt.
The university told ABC News the TCF Bank account was "one of the best banking options available to students," but that students were welcome to look elsewhere. But Rep. Miller said most are easily persuaded to sign up with the financial institution that calls itself the school's "official bank." He said records show 85 percent of incoming freshmen at University of Minnesota are signing up for TCF Bank accounts.
"People have an attachment to their university," Miller said. "And the university is using that persuade these student to engage in this practice whether or not it's to the benefit of the students or not."