BILL ANALYSIS �
AB 1162
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ASSEMBLY THIRD READING
AB 1162 (Frazier)
As Amended May 1, 2013
Majority vote
HIGHER EDUCATION 9-3 APPROPRIATIONS 12-5
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|Ayes:|Williams, Bloom, Fong, |Ayes:|Gatto, Bocanegra, |
| |Fox, | |Bradford, |
| |Jones-Sawyer, Levine, | |Ian Calderon, Campos, |
| |Medina, Quirk-Silva, | |Eggman, Gomez, Hall, |
| |Weber | |Ammiano, Pan, Quirk, |
| | | |Weber |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Waldron, Olsen, Wilk |Nays:|Harkey, Bigelow, |
| | | |Donnelly, Linder, Wagner |
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SUMMARY : Requires the Board of Trustees of the California State
University (CSU) and the Board of Governors of the California
Community Colleges (CCC) and requests the Regents of the
University of California (UC) and the governing bodies of
accredited private non-profit postsecondary institutions, to
adopt policies for negotiating contracts between their
postsecondary educational institutions and banks and other
financial institutions to disburse students' financial aid
awards and other refunds onto a debit card, prepaid card, or a
preloaded card. Specifically, this bill :
1)Requires the Board of Trustees (BOT) of the CSU and the Board
of Governors (BOG) of the CCC and requests the Regents of the
UC and the governing bodies of accredited private non-profit
postsecondary institutions, to adopt policies to be used for
negotiating contracts between their postsecondary educational
institutions and banks and other financial institutions to
disburse students' financial aid awards and other refunds onto
a debit card, prepaid card or a preloaded card.
2)Encourages the policies created by all postsecondary
educational institutions in California to best serve the needs
of the students by considering to include all of the following
when adopting their policies:
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a) Whether to provide students clear and unbiased choices
as to where to bank by ensuring that students can elect to
receive their financial aid award and other refunds through
their own existing bank accounts or by way of a paper
check;
b) Whether to ensure students are not subjected to
paperwork that attempts to direct them to banking options
favored by the bank or financial institution with which the
institution is partnering;
c) Whether to require at least one fee free automated
teller machine (ATM) to be located on a participating
campus and satellite campus;
d) Whether to require an additional ATM for every 3,000
students enrolled at which a student may use his or her
debit card, prepaid card or preloaded card in order to
access his or her financial aid award and other refunds;
e) Whether to prohibit the debit card, prepaid cards or
preloaded cards from imposing the following fees on
students, including, but not limited to:
i) Insufficient fund fees at ATMs or point of sale,
ii) Account balance inquiry fees,
iii) PIN-based transaction fees,
iv) Inactive account fees,
v) Replacement card fees,
vi) Transfer or wire fees,
vii) Dispute fees, and,
viii) Account wire fees.
f) Whether to require all debit card, prepaid card or
preloaded card fees to be prominently displayed on the
partnering or financial institution's Web site and/or have
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the information mailed to students;
g) Whether to prohibit the debit cards, prepaid cards or
preloaded cards from including the logo of the
postsecondary educational institution;
h) Whether to require the debit cards, prepaid cards or
preloaded cards to include the same level of consumer
protections that are provided to ATM customers under the
federal Electronic Fund Transfer Act, 15 United States Code
(U.S.C.) 1601 et seq., as it exists on January 1, 2014;
and,
i) Whether to prohibit debit card, prepaid card or
preloaded card contracts from including mandatory
arbitration clauses.
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 funds transfers and may be used
without unique identifying information such as a personal
identification number to initiate access to the debit
cardholder's account (Civil Code (CIV) Section 1748.30).
2)Limits a debit cardholder's liability for unauthorized use of
a debit card (CIV Section 1748.31).
3)Provides for a variety of student financial aid programs
including the Cal Grant programs and the CCC Board of
Governors fee waiver program. Current law requires that
eligibility for a Cal Grant and the determination of financial
need be accomplished using the Free Application for Federal
Student Aid (FAFSA), 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 postsecondary educational institution.
Current law makes an exception to this requirement for the BOG
fee waiver program which is authorized to use a simplified
application designed for that sole purpose (Education Code
Sections 69432.9 and 69433).
FISCAL EFFECT : According to the Assembly Appropriations
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Committee, costs would be absorbable for the public
postsecondary segments to adopt the policies, including their
consideration of the specified parameters. To the extent the
inclusion of some of the suggested contract provisions reduces
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 these services in the most competitive manner
possible.
COMMENTS : When students receive financial aid, whether it is in
the form of 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 lower cost and save money. 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 come with 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 on student choice
and weaker consumer protections on certain cards that hold
student aid funds.
According to a recent report by the U.S. Public Interest
Research Group (PIRG) Education Fund, debit cards for disbursing
funds may be good for colleges, but argue that cash-strapped
students absorb the costs. The PIRG study finds that some debit
cards come with fees as high as 50 cents per swipe in
transaction fees, $38.00 per overdraft and $10.00 for inactivity
after six months without use. The PIRG study finds that
students do not fully realize what they are signing up for when
they elect to receive their financial aid award via debit card.
The author states, "This bill was written based off the recent
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U.S. PIRG Campus Debit Card Trap and the National Association of
College and University Business Officers reports describing best
practices for negotiations of the contract between a college or
university and a bank or financial firm." This measure seeks to
protect students by ensuring California colleges and
universities set fair and appropriate regulations in place for
campus debit card programs in order to best serve and protect
their students; making sure they are not unfairly targeted or
faced with aggressive marketing.
Arguments in support: The Center for Responsible Lending argues
that students who opt to receive their financial aid on a debit
card should be entitled to fair limits on the fees they incur to
access and utilize their own money.
Arguments in opposition: The California Bankers Association
argues that this measure is an infringement on a bank's freedom
to price for services rendered.
Previous legislation: AB 262 (Coto), Chapter 679, Statutes of
2007, required the BOT of the CSU and the BOG of the CCC and
urged the Regents of the UC and to 1) annually direct each of
their campuses to disclose specified information regarding
on-campus credit card marketing activities, and 2) prohibit
banks and other commercial entities from offering gifts to
students in exchange for completing credit card applications.
Analysis Prepared by : Jeanice Warden / HIGHER ED. / (916)
319-3960
FN: 0000538