Page 110 - Pay Magazine s2014

Government watch
Navigating the Regulatory Waters
of brokered deposits, which are certificates of deposit with above market yields that are then used to make risky loans.”
Campus Cards
and the DOE
The U.S. Department of Education (DOE) released proposed rules for campus debit cards on May 18, 2015, that significantly would restrict fees and marketing activi- ties for financial services products used to distribute federal student aid funds to college students.
often receive financial aid multiple times over the course of a sem- ester, the 30-day fee prohibition, when combined with the require- ment to provide surcharge-free ATM access to the student, would potentially require providers to never charge any fees for using
a campus card.
The NBPCA, which called on the DOE to withdraw its proposal and leave campus card regulation to prudential financial regulators, maintains that the proposed rule’s broad prohibition on fees would prove so restrictive, it would cause third-party servicers to leave the market, eliminating a desirable
and affordable disbursement option for students and schools. “We support providing students with a fee-free way to access their Title IV payments, and card providers currently comply with existing laws by providing cardholders with a one-time, fee-free removal of all funds from their campus cards as well as free access to in-network ATMs or branch offices on or near campus,” Fauss explains.
The NBPCA has been engaging legislators, third-party advocacy groups, colleges and students
to discuss the substantial risks to the continued availability of this beneficial method of disbursing financial aid if the overly burden- some restrictions appearing in
the proposed rule aren’t corrected in the final version.
“Because the final rule must be published in the Federal Register
by Nov. 1, 2015, to be effective
for the following fall semester, the clock on this issue is quickly ticking away,” says Fauss. “Affected stake- holders must mobilize quickly to have any chance to influence the final rule.”
Tax Refund
Fraud Legislation
During the tail-end of the tax season this year, several U.S. senators proposed legislation that takes aim at companies that enable consumers to receive their tax refunds on prepaid cards.
The Identity Theft and Tax Fraud Prevention Act of 2015, introduced in April, defines prepaid cards as “at-risk accounts” if they’re not verified accounts—verified ac- counts being those for which the identity of the prepaid customer associated with the account is verified by documentary customer identification procedures, such
as verifying an unexpired driver’s license or passport.
The bill also would require fed- eral primary financial regulatory agencies to propose regulations requiring newly issued deposit or transaction account numbers to be distinguishable between verified accounts and at-risk accounts.
While there have been calls by some legislators and regulators to separately track routing and transit numbers (RTNs) for prepaid ac- counts, this solution is impractical because financial institutions often use the same RTNs for multiple
108
The proposed rules specifically affect Title IV disbursements—the federal student aid money re- funded to college students after tuition and fees are paid to the school—and break the market
into Tier 1 arrangements (be- tween universities and third-party servicers) and Tier 2 arrangements (between universities and financial institutions). One of the more onerous requirements under
Tier 1 arrangements is the pro- hibition against most transaction fees for a period of 30 days after Title IV funds are deposited onto the campus card. Because students