BILL ANALYSIS �
AB 1162
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Date of Hearing: May 1, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 1162 (Frazier) - As Amended: May 1, 2013
Policy Committee: Higher
EducationVote:9-3
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill requires the Trustees of the California State
University (CSU) and Board of Governor's the California
Community Colleges (CCC), and requests the Regents of the
University of California (UC) and the governing bodies of
accredited private non-profit and for-profit postsecondary
institutions, to adopt policies for negotiating contracts
between their respective campuses and banks and other financial
institutions to disburse students' financial aid awards onto a
debit card, prepaid card, or preloaded card.
In adopting these policies, the bill encourages the institutions
to consider whether to include specified provisions, such as
providing students an unbiased choice of where to bank,
prohibiting certain types of fees, providing sufficient numbers
of fee-free ATMs, and providing the same level of consumer
protections as provided under federal law for debit cards linked
to traditional bank accounts.
FISCAL EFFECT
Costs would be absorbable for the public postsecondary segments
to adopt the policies, including their consideration the
specified parameters. To the extent the inclusion of some of the
suggested contract provisions reduced the number of vendors
interested in providing debit card services, colleges' and
universities' cost for these services could increase. It is
presumed that the governing boards' policies will provide
sufficient flexibility to allow campuses to obtain theses
services in the most competitive manner possible.
AB 1162
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COMMENTS
1)Background and Purpose . When students receive financial aid,
whether as a scholarship, grant, or student loan, schools
apply that money to college costs then disburse the rest to
the student. Instead of disbursing aid refunds by check, many
campuses are funding financial aid awards through special
debit cards that sometimes double as student identification
cards.
According to the author, colleges and universities are
outsourcing their student financial aid distribution to banks
and financial firms in order to reduce costs. These banks and
financial firms then issue debit cards to the students so they
can access their financial aid. The federal government
requires that schools disburse financial aid refunds to
students free of charge, however, these debit cards carry fees
for other services that can take away from students' aid. As a
result students end up bearing some costs directly, including
per-swipe fees, inactivity fees, overdraft fees, ATM fees and
more. The author contends that other issues include aggressive
marketing strategies by partnering companies and weaker
consumer protections on certain cards.
2)Opposition . The California Bankers Association argues that
enactment of policies as contemplated in the bill could be an
infringement on a bank's freedom to price for services
rendered.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081