BILL ANALYSIS �
-----------------------------------------------------------------
|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 Le�n, 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