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Consumer Financial Protection Bureau to look at University of Minnesota's long-term agreement with TCF Bank
Relationships between universities and financial institutions, like the one between the University of Minnesota and TCF Bank, are being analyzed to see if they take advantage of students.
While University and TCF officials say their relationship is fair to students, some students said they felt pressured to open a checking account with the bank during orientation.
The Consumer Financial Protection Bureau said in a release Thursday it would request information on how arrangements between banks and higher education institutions are structured.
The request comes amid increased scrutiny over how banks and universities do business.
In August, Higher One, a Connecticut-based company that handles financial aid disbursement, paid $11 million in settlements to 60,000 students. The company overcharged them with multiple fees from single transactions, according to the Federal Deposit Insurance Corporation.
TCF doesn’t handle the disbursement of financial aid at the University, said Richard Pfutzenreuter, the University’s chief financial officer.
But the CFPB is concerned that banks and universities may pressure students into arrangements that serve them more than students.
“Less is known about how [this] market works, like how schools enter these agreements,” said Rohit Chopra, the CFPB’s student loan ombudsman.
The University has a contractual agreement with TCF that extends through 2023 with an optional six-year extension, according to a June letter Pfutzenreuter sent to University administrators.
In 2005, the agreement was renewed when the bank donated $35 million for the right to name the football stadium.
The University receives a royalty payment from TCF based on the number of active U Card Checking Accounts, the letter said.
In June, the University was receiving $1 million per year.
Pfutzenreuter said the University will welcome any advice outside agencies can give. He also said he would provide information to the bureau upon request.
“Once they ask, it’s wide open,” Pfutzenreuter said.
The inquiry won’t affect the University’s relationship with TCF, said Jason Korstange, a TCF spokesman.
“Ours is a very open relationship with the University of Minnesota,” he said, “and we expect to continue it for a long time.”
Students, faculty and staff have the option to tie their U Cards to a separate checking account managed by TCF. The U Card Checking Account provides a number of conveniences, like free checking and access to 21 campus ATMs, but it’s not required, the letter said.
About 36,000 U Card Checking Accounts were active as of May 2012.
Michaela Mahin, a food science freshman, said she didn’t open a U Card Checking Account although she felt pressured to do so at freshman orientation.
“It was highly pushed,” Mahin said, “like you should do this, you need to do this.”
TCF allocates $200,000 to the University annually to market the U Card, according to the royalty agreement between the two parties.
Those funds go to incentives, such as the sweatshirts provided to students who open an account.
The U Card Checking Account is presented to students as an option during the first day of orientation, according to a statement from the U Card Office.
Grace Rexroat, an ecology, evolution and behavior freshman from Kansas, said she likes keeping a TCF account in addition to the one she uses at home because it forces her to budget.
However, Rexroat added there “was a lot [of marketing] at orientation and in the mail. … They were selling it hard.”
Michael Houston, a marketing professor and associate dean in the Carlson School of Management, said he believes the inquiry could be helpful to students.
“Anything that better informs [students] about financial problems they’ll encounter is helpful,” Houston said.
Korstange said TCF welcomes any review of its arrangement with the University.
“We will continue to follow all the rules regulators set for us,” he said.
© 2013 The Minnesota Daily