BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 845| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- 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 CONTINUED SB 845 Page 2 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: CONTINUED SB 845 Page 3 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 CONTINUED SB 845 Page 4 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 CONTINUED SB 845 Page 5 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 **** END **** CONTINUED