BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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                                    THIRD READING


          Bill No:  SB 845
          Author:   Correa (D)
          Amended:  5/7/14
          Vote:     21


           SENATE EDUCATION COMMITTEE  :  9-0, 3/26/14
          AYES:  Liu, Wyland, Block, Correa, Galgiani, Hancock, Hueso,  
            Huff, Monning

           SENATE BANKING & FINANCIAL INST. COMM  .:  9-0, 4/30/14
          AYES:  Evans, Block, Correa, Hill, Hueso, Morrell, Roth, Torres,  
            Vidak

           SENATE APPROPRIATIONS COMMITTEE  :  7-0, 5/19/14
          AYES:  De León, Walters, Gaines, Hill, Lara, Padilla, Steinberg


           SUBJECT  :    Electronic disbursement of student financial aid

           SOURCE  :     California State Student Association


           DIGEST  :    This bill requires the California Community College  
          (CCC) Board of Governors (BOG) and the California State  
          University (CSU) Trustees, and requests the University of  
          California (UC) Regents and the governing body of an accredited  
          private post-secondary educational institution, to develop one  
          or more model contracts and all binding contracts, as specified,  
          for use by their respective systems to disburse a financial aid  
          award, scholarship aid, campus-based aid award, or school  
          refunds onto debit cards, prepaid cards or other preloaded cards  
          issued by a financial institution, as specified, and to post  
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          model and actual contracts on their respective Internet Web  
          sites.

           ANALYSIS  :    Federal regulations establish rules for the  
          disbursement of federal financial aid to students.  These rules  
          authorize a school to establish a policy requiring its students  
          to provide bank account information, or open an account at a  
          bank of their choosing as long as this policy does not delay the  
          disbursement of Federal Student Aid funds to students.  In  
          situations where a school opens a bank account on behalf of the  
          student, the rules require that schools comply with conditions  
          related to consent, notice, disclosure and costs to open or  
          transact on the account and additionally require that the school  
          ensure that the student has convenient access to a branch office  
          or ATMs of the bank so that the student does not incur any cost  
          in making cash withdrawals.  Additionally, the regulations  
          require that the branch office or ATMs be located on the  
          institution's campus, in institutionally-owned or operated  
          facilities, or immediately adjacent to and accessible from the  
          campus.  These rules also include conditions that must be met if  
          a school uses a store value card or prepaid debit cards. 

          Existing law:

          1.Defines the term "debit card" as an accepted card or other  
            means of access to a debit cardholder's account that may be  
            used to initiate electronic fund transfers and may be used  
            without unique identifying information such as a personal  
            identification number to initiate access to the debit  
            cardholder's account.

          2.Provides for a variety of student financial aid programs  
            including the Cal Grant programs and the CCC BOG fee waiver  
            program.

          3.Requires that eligibility for a Cal Grant and the  
            determination of financial need be accomplished using the Free  
            Application for Federal Student Aid, and that this application  
            be used for all programs funded by the state or a public  
            institution of post-secondary education as well as all federal  
            programs administered by a post-secondary educational  
            institution.

          This bill:

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          1.Requires the CCC BOG and the CSU Trustees and request the UC  
            Regents and each governing body of an accredited private  
            postsecondary educational institution to develop one or more  
            model contracts for use at their respective systems to  
            disburse a financial aid award, scholarship aid, campus-based  
            aid award, or school refunds onto debit, prepaid, or preloaded  
            cards issued by a financial institution.

          2.Requires that each model contract be developed:

               A.     In consultation with specified stakeholders, and not  
                 be finalized before public comment is sought and  
                 deliberated.

               B.     Considering the best interests of students.

               C.     At a minimum, containing provisions that reflect  
                 conditions required for compliance with federal  
                 regulations governing the disbursement of federal  
                 financial aid.

          1.Requires the CCCs and CSU and request UC and the private  
            colleges and universities subject to this bill to make every  
            model contract they develop and every bidding contract  
            negotiated by an educational institution under the  
            jurisdiction of one of these governing bodies with a financial  
            institution for the disbursement of a financial aid award,  
            scholarship, campus-based aid award, or school refund onto a  
            debit card, prepaid card, or preloaded card, publicly  
            available on their Internet Web sites.

          2.Requires the CCCs and CSU and request UC and the private  
            colleges and universities subject to this bill to additionally  
            consider the following, when developing each model contract:

             A.   The number of on-campus locations and proximity of  
               off-campus locations where a fee-free withdrawal can be  
               made by a student using a debit/prepaid/preloaded card.

             B.   The type and size of fees a student would incur from  
               debit/prepaid/preload card usage and whether provisions of  
               the model contract ensure that the educational institution  
               is provided information by the card-issuing financial  

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               institution to evaluate the costs of these fees to  
               students.

             C.   The impact, if any, that offering a card displaying the  
               name or mascot of a campus or educational system would have  
               on students, their campus, or their educational system.

             D.   Whether provisions of the model contract ensure that the  
               educational institution monitors compliance by the  
               financial institution with federal Title IV requirements  
               governing the disbursement of financial aid.

             E.   Whether provisions of the model contract ensure a  
               process to track and resolve student complaints about the  
               card-issuing financial institution's credit delivery,  
               customer service, and debit/prepaid/preloaded cards.

             F.   The impact, if any, of the content of a dispute  
               resolution clause on students, their campus, and their  
               educational system, if a conflict were to arise between a  
               student and the card-issuing financial institution.

             G.   Whether provisions of the model contract ensure that the  
               educational institution does not disclose student  
               information to the card-issuing financial institution  
               beyond what is necessary for that institution to perform  
               the contracted financial aid award, scholarship,  
               campus-based aid award, or school refund disbursement  
               function.

             H.   Whether provisions of the model contract ensure that the  
               card-issuing financial institution does not solicit or  
               collect information from a student that is not necessary to  
               perform the contracted financial aid award, scholarship,  
               campus-based aid award, or school refund disbursement  
               function, as a condition of allowing the student to access  
               financial aid award, scholarship, campus-based aid award,  
               or school refund through a debit/prepaid/preloaded card.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  No

          According to the Senate Appropriations Committee, the  
          requirements of this bill will create a minor workload increase  

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          at all of the segments of public postsecondary education to post  
          the contracts entered into by their respective campuses and to  
          create model contracts.  Costs to the CCC, CSU, and UC will be  
          minor and absorbable as long as a short-term deadline is not  
          imposed for creating model contracts.

           SUPPORT  :   (Verified  5/20/14)

          California State Student Association (source)
          California Communities United Institute
          Community College League of California
          Higher One
          University of California Student Association

           ARGUMENTS IN SUPPORT  :    According to the author's office,  
          colleges and universities are increasingly contracting with  
          financial institutions to disburse financial aid and process  
          credit balance refunds.  The author argues, one of the greatest  
          challenges facing students and policymakers is the highly  
          individualized approach taken by California campuses toward  
          these contracts with financial institutions.  Individual  
          campuses are on their own when negotiating, and as a result,  
          these contracts are often criticized as failing to uphold the  
          best interests of students.  Because of their size and  
          bargaining power, the systems are in a much better position to  
          negotiate contracts than individual campuses.  In addition, the  
          development of model contracts will help ensure uniformity in  
          the terms and conditions that apply to the issuance of  
          debit/prepaid/preloaded cards to California's college students.


          PQ:e  5/21/14   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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