Earlier this month, Higher One agreed to make restitution of $11 million to college students for overcharging them in debit card fees and other ways.
According to the Federal Deposit Insurance Corp., which regulates such banking agreements, Higher One also has to pay a $110,000 civil fine and must change the way it imposes fees on students. Bancorp Bank, the company that issues the OneAccount debit card used by Higher One on college campuses, also has to pay a $172,000 fine for its part in overcharging students.
That news came just a few months after a report by U.S. PIRG Education Fund, an advocacy group, argued that banks and universities are taking advantage of students through various contracts, including ones that tie university ID cards to debit or checking accounts and to banks that handle student financial aid disbursements.
“This is not a new phenomenon,” says Rich Williams, one of the authors of that U.S. PIRG study. “Banks know that young people need checking accounts and banking products. Banks are willing to pay top dollar for these students; they could get years of consumers.”
Williams says any deal that a university makes with a bank is an implicit endorsement of that bank. That, in turn, can influence young, financially uneducated students.
“If you walk into a Banana Republic, you know people work on commission. So if they complement you, you’ll be suspicious,” Williams says. In that vein, he says students should be made aware of contracts their universities have with banks, and what exactly those contracts say.
University officials say these agreements make life easier for universities and students. A press release sent out by PNC Bank and the University of Akron this summer maintained:
“PNC’s demonstrated commitment to financial education, innovative personal banking tools and extensive branch network in Ohio make this relationship a good fit for the University,” said Charles J. Fey, Vice President for Student Engagement and Success at UA. “We look forward to working with PNC to enhance the campus experience for our community.”
Advocates like Williams concede that some contracts are well structured, but he says most are structured to benefit the bank and the university, not the students.
In Ohio, relationships between public universities and banks are not regulated, yet.
“But I think it merits some careful review and analysis,” says Board of Regents Chairman Jim Tuschman. “The students who are confronted with these opportunities to get some form of credit card or debit card are usually new students, incoming students, and I would think that they’re inundated with a lot of decisions, sometimes for the first time.”
StateImpact Ohio requested banking contracts from Ohio’s 14 public universities. Here’s what we found.
THE OHIO STATE UNIVERSITY
Ohio State University recently signed a high-profile, $25 million contract with Huntington Bank, making Huntington OSU’s “official bank.”
That deal also gives the option to link the university’s BuckID student ID cards to a Huntington account.
And, as part of the deal, Huntington has to put $25 million in investments and $75 million in loans toward community development around the University District and University Hospital East.
BOWLING GREEN STATE UNIVERSITY
Bowling Green State University has a pretty standard deal with PNC Bank. It also includes the option to tie the University ID card to a PNC account. And, it gives the bank marketing and advertising opportunities on campus, and allows it to set up ATMs and present financial seminars.
Such agreements often include a “program” that lays out how many new bank accounts have to be opened by students and faculty on campus.
That program is matched with a schedule of royalties to be paid to the university.
In other words, there is a financial incentive for a university to make sure the program stays on schedule, though the royalties generally aren’t significant amounts.
UNIVERSITY OF AKRON
Many contracts, like the one the University of Akron has with PNC Bank, include additional royalties to the university if the “program goals” are exceeded.
Miami University recently made a deal with PNC Bank similar to the ones at the University of Akron and BGSU. This deal includes PNC Bank establishing a branch on campus.
Although this contract is very recent, university officials say they are currently negotiating with PNC Bank to change aspects of the deal.
YOUNGSTOWN STATE UNIVERSITY
Youngstown State University has a deal with U.S. Bank to make investments on the university’s behalf.
It also has agreements with Farmers National Bank, First Place Bank, Home Savings & Loan, Huntington Bank and PNC Bank to sponsor sporting events.
KENT STATE UNIVERSITY
Kent State University has a contract with Higher One to handle their student financial aid disbursements.
Higher One also retains the right to charge customers a $1 monthly fee.
SHAWNEE STATE UNIVERSITY
Shawnee State University has a deal with U.S. Bank to handle all its employee payroll deposits.
Some bank contracts are missing from this list. For example, the University of Toledo and the University of Cincinnati both have contract language that requires them to notify their banking partner in the event of a public records request. As soon as we get the remaining bank contracts, we’ll be sure to add them here.
Clarification: A previous version of this story stated that as part of OSU’s deal with Huntington, the bank will give “$75 million in loans to the university.” Those loans will be used to revitalize the University District through community development, and are not loans to the university itself.