According to a news release from the Department of Education (10/27/15), the new regulations will help students who have college debit or prepaid cards. The Department of Education, citing information from the Government Accountability Office and the U.S. Public Interest Research Group, notes that institutions enrolling around nine million students have agreements with financial institutions offering debit or prepaid cards, with almost $25 million in Pell Grant and Direct Loan funds released to such accounts.
Among the new regulations is a rule requiring institutions to “ensure that students are not charged excessive and confusing fees (e.g., overdraft fees and transaction-swipe fees) if a student selects an account offered directly or indirectly by contractors that assist institutions in making direct payments of Federal student aid.” Additional regulations include requiring institutions to give students more choice about how they wish to receive student aid and prohibiting institutions from requiring parents or students to open certain accounts into which student aid refunds are deposited.
READ MORE CREDIT UNION EXCECESSIVE OVERDRAFT FEES LEGAL NEWS
The new rules will take effect in 2016.
Banks, credit unions and other financial institutions have come under fire in recent years for allegedly using unfair and excessive overdraft fees to drive consumers into overdraft more quickly. Various financial institutions have faced lawsuits filed by consumers alleging the institutions unfairly reordered debit transactions from highest to lowest to push consumers further into overdraft and maximize profits from overdraft fees.