Amended in Senate August 19, 2014

Amended in Senate July 2, 2014

Amended in Senate June 19, 2014

Amended in Senate June 4, 2014

Amended in Assembly May 5, 2014

Amended in Assembly April 10, 2014

California Legislature—2013–14 Regular Session

Assembly Bill No. 1927

Introduced by Assembly Member Frazier

February 19, 2014

An act to add Section 69505.7 to the Education Code, relating to student financial aid.

LEGISLATIVE COUNSEL’S DIGEST

AB 1927, as amended, Frazier. Student financial aid: debit cards.

Existing law provides for the missions and functions of the private and public segments of postsecondary education in the state. Existing law establishes various student financial aid programs for students attending all segments of postsecondary begin delete education. end delete begin insert education, including the Ortiz-Pacheco-Poochigian-Vasconcellos Cal Grant Program (Cal Grant Program), which establishes the Cal Grant A and B Entitlement Awards, the California Community College Transfer Cal Grant Entitlement Awards, the Competitive Cal Grant A and B Awards, the Cal Grant C Awards, and the Cal Grant T Awards under the administration of the Student Aid Commission, and establishes eligibility requirements for awards under these programs for participating students attending qualifying institutions. end insert

This bill would require the Board of Governors of the California Community begin delete Colleges and end delete begin insert Colleges, end insert the Trustees of the California State University, begin delete and would request end delete the Regents of the University of begin delete California end delete begin insert California, end insert and the governing bodies of accredited private nonprofit and for-profit postsecondary educational institutions, begin insert as a condition for participation in the Cal Grant Program, end insert to adopt policies to be used for negotiating contracts for disbursements of financial aid awards and other refunds onto debit cards, prepaid cards, or preloaded cards. The bill would require the policies to ensure that contracts between postsecondary educational institutions and banks or other financial institutions to disburse a student’s financial aid award are consistent with certain provisions of federal law, and, in addition, do certain other things, including prohibiting the sale or sharing of personal information, as defined, that the student or the postsecondary educational institution provides the bank or other financial institution, as specified; prohibiting the bank or other financial institution from imposing a point-of-sale transaction fee on a student for the use of the debit card, prepaid card, or preloaded card; providing a clear and conspicuous disclosure to students of all fees associated with the debit card, prepaid card, or preloaded card; and requiring the postsecondary educational institution to disclose to students the benefits and student responsibilities associated with all financial aid disbursement options offered by the postsecondary educational institution. The bill would provide for policies adopted under these provisions and associated contracts with banks or other financial institutions to be publicly available on the postsecondary educational institution’s Internet Web site.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 69505.7 is added to the Education Code,
to read:

69505.7.  

(a)  begin delete The end delete begin insert As a condition for participation in the Cal
Grant Program established pursuant to Chapter 1.7 (commencing
with Section 69430) , the end insert Board of Governors of the California
Community begin delete Colleges and end delete begin insert Colleges, end insert the Trustees of the California
State begin delete University shall, and end delete begin insert University, end insert the Regents of the University
of begin delete California end delete begin insert California, end insert and the governing bodies of accredited
private nonprofit and for-profit postsecondary educational
institutions begin delete are requested to, end delete begin insert shall end insert adopt policies to be used for
negotiating contracts for the disbursement of students’ financial
aid awards and other refunds onto debit cards, prepaid cards, or
preloaded cards. These policies shall not be finalized before public
comment is sought and considered.

(b) The policies adopted pursuant to subdivision (a) shall best
serve the needs of students and ensure that contracts between
postsecondary educational institutions and banks or other financial
institutions to disburse a student’s financial aid award and other
refunds onto a debit card, prepaid card, or preloaded card meet
both of the following sets of requirements:

(1) The policies shall ensure that those contracts are consistent
with federal law, including, but not limited to, provisions in federal
law that require these contracts to do all of the following:

(A) Ensure that the student does not incur any cost to open the
account or initially receive the debit card, prepaid card, or
preloaded card, as provided in Section 668.164(c)(3)(iv) of Title
34 of the Code of Federal Regulations, as that section read on July
1, 2011.

(B) Ensure that the student has convenient access to a branch
office of the bank or an automated teller machine of the bank in
which the account was opened or of another bank, so that the
student does not incur any cost to make withdrawals from that
office or those automated teller machines, and that the branch
office or automated teller machines be located on the postsecondary
educational institution’s campus, in an institutionally owned or
operated facility, or immediately adjacent to and accessible from
the campus, as provided in Section 668.164(c)(3)(v) of Title 34
of the Code of Federal Regulations, as that section read on July 1,
2011.

(C) Ensure that the debit card, prepaid card, or preloaded card
can be widely used, including ensuring that use of the card is not
limited by the card-issuing institution to particular vendors as
provided in Section 668.164(c)(3)(vi) of Title 34 begin delete ofthe end delete begin insert of the end insert Code
of Federal Regulations, as that section read on July 1, 2011.

(D) Forbid the marketing or portrayal of the account or debit
card, prepaid card, or preloaded card as a credit card or credit
instrument, or the subsequent conversion of the account or debit
card, prepaid card, or preloaded card to a credit card or credit
instrument, as provided in Section 668.164(c)(3)(vii) of Title 34
of the Code of Federal Regulations, as that section read on July 1,
2011.

(2) In addition to the requirements specified in paragraph (1),
the policies shall do at least all of the following:

(A) Prohibit revenue sharing between a postsecondary
educational institution and banks or other financial institutions.
For the purpose of this subparagraph, “revenue sharing” means an
arrangement between a postsecondary educational institution and
a bank or other financial institution pursuant to which the
postsecondary educational institution recommends, promotes,
utilizes, sponsors, or otherwise endorses the bank or other financial
institution or the debit card, prepaid card, or preloaded card issued
by the bank or other financial institution and, in exchange, the
bank or other financial institution pays a fee or provides other
material benefits, including revenue or profit sharing, to the
postsecondary educational institution or an officer, employee, or
agent of the postsecondary educational institution.

(B) Prohibit the sale or sharing of personal information, as
defined in paragraph (1) of subdivision (d) of Section 1798.81.5
of the Civil Code, that the student or the postsecondary educational
institution provides the bank or other financial institution, unless
it is necessary for the purpose of providing services related to the
opening or maintenance of a debit card, prepaid card, or preloaded
card account. The personal information disclosed by the
postsecondary educational institution or solicited by the bank or
other financial institution, and the treatment of that information,
shall be consistent with the federal Family Educational Rights and
Privacy Act of 2001 (20 U.S.C. Sec. 1232g).

(C) Prohibit the bank or other financial institution from imposing
a point-of-sale transaction fee on a student for the use of the debit
card, prepaid card, or preloaded card.

(D) Require the card-issuing bank or other financial institution
to provide a clear and conspicuous disclosure to students of all
fees associated with the debit card, prepaid card, or preloaded card
in no less than 10-point font, before they opt to open an account
or receive a debit card, prepaid card, or preloaded card issued by
that bank or financial institution, and to provide a readily accessible
link to a printable version of this fee list from the homepage of the
Internet Web site of the bank or other financial institution.

(E) If the debit card, prepaid card, or preloaded card is
cobranded, require the card-issuing bank or other financial
institution to provide a clear and conspicuous disclosure to students
in no less than 10-point font, before they opt to open an account
or receive a debit card, prepaid card, or preloaded card issued by
that bank or financial institution, that the card is not endorsed by
the postsecondary educational institution.

(F) Require the postsecondary educational institution to disclose
to students the benefits and student responsibilities associated with
all financial aid disbursement options offered by the postsecondary
educational institution.

(c) The Board of Governors of the California Community
begin delete Colleges and end delete begin insert Colleges, end insert the Trustees of the California State
begin delete University shall, and end delete begin insert University, end insert the Regents of the University of
begin delete California end delete begin insert California, end insert and the governing bodies of accredited
private nonprofit and for-profit postsecondary educational
institutions begin delete are requested to, end delete begin insert shall end insert make publicly available on their
respective Internet Web sites every policy developed pursuant to
subdivisions (a) and (b) and every binding contract negotiated by
a postsecondary educational institution under the jurisdiction of
one of these governing bodies with a financial institution for
disbursement of students’ financial aid awards and other refunds
onto debit cards, prepaid cards, or preloaded cards.

(d) This section shall only apply to contracts between
postsecondary educational institutions and entities, whether specific
depository institutions, financial institutions, or entities that partner
with one or more depository institutions or financial institutions,
for the direct disbursement of students’ financial aid awards and
other refunds onto debit, prepaid, or preloaded cards that are
established or opened as an integrated feature of the financial aid
award disbursement process.