A proposed rule from the Department of Education regulating Title IV student aid credit balances includes provisions regulating campus bank accounts that may harm the students who benefit from these accounts, ABA and two other financial trade groups said in a comment letter on Thursday.
While they shared the stated goals of the proposal, groups noted that it contains some significantly problematic provisions “impos[ing]a new and burdensome layer of regulatory complexity and uncertainty, which may drive financial institutions to abandon the student bank account market, reducing competition, availability, and choice for students,” the groups said. It is also incomplete and unclear in places, they added.
Underlying these problems is DoE’s lack of statutory authority to oversee financial products, the groups said. “While the proposal contains a lengthy ‘statutory authority’ section, none of the provisions cited gives the department the authority to regulate bank accounts,” the groups said.
Though DoE says the proposal only affects higher education institutions, ABA said that it would “require educational institutions to implement an extensive regulatory scheme, which in turn would result in extensive requirements on financial institutions — in other words, adoption of the proposal would render the department a de facto regulator of financial institutions.” For more information, contact ABA’s Anjali Phillips.