BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 1927|
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THIRD READING
Bill No: AB 1927
Author: Frazier (D)
Amended: 8/19/14 in Senate
Vote: 21
SENATE EDUCATION COMMITTEE : 5-2, 6/11/14
AYES: Liu, Block, Correa, Hancock, Monning
NOES: Wyland, Huff
SENATE BANKING & FINANCIAL INST. COMM. : 6-2, 6/25/14
AYES: Evans, Correa, Hill, Hueso, Roth, Torres
NOES: Morrell, Vidak
NO VOTE RECORDED: Block
SENATE APPROPRIATIONS COMMITTEE : 5-0, 8/14/14
AYES: De Le�n, Hill, Lara, Padilla, Steinberg
NO VOTE RECORDED: Walters, Gaines
ASSEMBLY FLOOR : 53-22, 5/19/14 - See last page for vote
SUBJECT : Student financial aid debit cards
SOURCE : Author
DIGEST : This bill requires the California Community College
(CCC) Board of Governors (BOG), the California State University
(CSU) Trustees, the University of California (UC) Regents and
the governing bodies of private nonprofit and for-profit
postsecondary educational institutions, as a condition for
participating in the Cal Grant Program to adopt policies, that
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2
best serve the needs of the students, when negotiating contracts
with banks and other financial institutions to disburse a
student's financial aid award, and other refunds onto debit,
prepaid, or preloaded cards, and requires the policies to meet
specified requirements.
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 automatic teller machines (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 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.
Existing law provides for a variety of student financial aid
programs including the Cal Grant programs and the CCC BOG fee
waiver program. Existing law 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 postsecondary
educational institution.
Existing law declares the Legislature's intent to ensure the
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protection of the personal information of California residents
and to encourage businesses that own or license personal
information about Californians to provide reasonable security
for that information. Under these provisions, a business that
owns or licenses personal information about a California
resident is required to implement and maintain reasonable
security procedures and practices to protect the personal
information from unauthorized access, destruction, use,
modification, or disclosure. These provisions also define
"personal information as social security number, driver's
license number or California identification card number, account
number, credit or debit card number, in combination with any
required security code, access code, or password that would
permit access to an individual's financial account, and medical
information."
This bill:
1.Requires the CCC BOG, the CSU Trustees, the UC Regents and the
governing bodies of private nonprofit and for-profit
postsecondary educational institutions, as a condition for
participating in the Cal Grant Program to adopt policies, that
best serve the needs of students, when negotiating contracts
with banks and other financial institutions for disbursing
financial aid awards and refunds onto debit cards, prepaid
cards or preloaded cards.
2.Requires that the adopted policies, consistent with specified
federal law, ensure that contracts to disburse a student's
financial aid awards and other refunds onto debit cards,
prepaid cards or preloaded cards:
A. Prohibit revenue sharing between segments and financial
institutions.
B. Prohibit the sale or sharing of personal information, as
defined, provided by the student or the institution, unless
it is necessary for the purpose of services related to the
opening or maintenance of the card account.
C. Prohibit the financial institution from imposing a point
of sale transaction fee on a student for use of the card.
D. Provide a clear and conspicuous disclosure to students
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of all associated fees.
E. If cobranded, provide a clear and conspicuous disclosure
to students that the card is not endorsed by the
educational institution.
F. Ensure the student does not incur any costs related to
opening an account or initially receiving the card.
G. Ensure the student has convenient access to a bank
branch or office or an automated teller machine so that
withdrawal costs are not incurred by the student.
H. Require that the office of ATM is located on the campus,
in an institutionally owned or operated facility, or
immediately adjacent to an accessible from the campus.
I. Ensure the card can be widely used.
J. Prohibit marketing, portraying, or subsequently
converting the account or card, into a credit card or
credit instrument.
AA. Require the educational institution to disclose the
benefits and student responsibilities for all financial aid
disbursement options offered by the educational
institution.
3.Requires that the adopted policies only be applied to
negotiating contracts for the purpose of disbursing a
student's financial aid award and other refunds onto a debit,
prepaid, or preloaded card.
4.Defines a "bank or other financial institution" to include,
but not be limited to, a depository institution or an entity
that partners with one or more depository institutions.
Prior Legislation
AB 1162 (Frazier, 2013), which was substantively similar to this
bill, would have required the CCC BOG and the CSU Trustees to
adopt policies that best serve the needs of the students when
negotiating contracts with financial institutions to disburse a
student's financial aid award onto debit, prepaid, or preloaded
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cards, and encouraged consideration of specific elements in
these policies. The bill also would have requested the UC
Regents and the governing bodies of private nonprofit and
for-profit postsecondary educational institutions to comply with
these provisions. The bill was heard and passed by the Senate
Education Committee by a vote of 6-2 in 2013, but subsequently
failed passage in the Senate Banking and Finance Committee by a
vote of 2-3.
SB 595 (Calderon, Chapter 217, Statutes of 2013) prohibits any
campus of the CCC or the CSU from entering into a contract with
any entity on or after
January 1, 2014, that requires students to open an account with
the entity as a condition of the student receiving a financial
aid disbursement, and requires that they offer a student the
option of receiving his/her financial aid disbursement via
direct deposit within one day of the disbursement of monies, as
specified. The bill also requests the UC to comply with these
provisions.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 8/20/14)
California Communities United Institute
California State University Student Association
CALPIRG
Consumers Union
Faculty Association of California Community Colleges
Student Senate for California Community Colleges
University of California Student Association
Veterans Caucus of the California Democratic Party
OPPOSITION : (Verified 8/20/14)
California Bankers Association
Higher One
ASSEMBLY FLOOR : 53-22, 5/19/14
AYES: Alejo, Ammiano, Bloom, Bocanegra, Bonilla, Bonta,
Bradford, Brown, Buchanan, Ian Calderon, Campos, Chau,
Chesbro, Cooley, Dababneh, Daly, Dickinson, Eggman, Fong, Fox,
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Frazier, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gray, Hall,
Roger Hern�ndez, Holden, Jones-Sawyer, Levine, Lowenthal,
Medina, Mullin, Muratsuchi, Pan, Perea, John A. P�rez, V.
Manuel P�rez, Quirk, Quirk-Silva, Rendon, Ridley-Thomas,
Salas, Skinner, Stone, Ting, Weber, Wieckowski, Williams,
Yamada, Atkins
NOES: Achadjian, Allen, Bigelow, Ch�vez, Conway, Dahle,
Donnelly, Beth Gaines, Gorell, Grove, Hagman, Harkey, Jones,
Linder, Logue, Maienschein, Melendez, Olsen, Patterson,
Wagner, Waldron, Wilk
NO VOTE RECORDED: Mansoor, Nazarian, Nestande, Rodriguez,
Vacancy
PQ:k 8/20/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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