ARLINGTON, Va.–The ability of some credit unions to provide financial services to students on college campuses may be affected by proposed rulemaking by the Department of Education, according to NAFCU.
In a letter to the department on its proposed rulemaking on student accounts in receipt of Title IV Higher Education Act (HEA) program funds, NAFCU Regulatory Affairs Counsel Kavitha Subramanian said the association supports greater transparency in financial services. But “we are concerned that some aspects of the DOE proposal may negatively harm the ability of well-regulated credit unions to serve this important student demographic.”
In the proposal, the DOE expands its current regulations to explicitly cover the activities of credit unions.
"NAFCU and our members appreciate that the DOE recognizes the important role that credit unions play in providing financial services to students on college campuses by redefining its current definitions," Subramanian wrote. "However, NAFCU would caution the DOE in future regulations to consider the unique business model of credit unions as member-owned cooperatives."
NAFCU noted that in the proposal the educational institution’s contractual relationship with certain third-party providers is categorized as either Tier 1 (T1) or Tier 2 (T2), with NAFCU noting that the definition of a T2 agreement is overly broad. It is calling on the DOE to reconsider its definition of T2 to exclude contractual agreements that are solely for the purpose of renting space or providing an ATM on the university campus.
For an account offered pursuant to a T1 or T2 arrangement, under the new proposal, the educational institution must establish a selection process under which the student or parent chooses one of several options for receiving those payments. Subramanian again notes in the letter that NAFCU supports information sharing and transparency to students, however, "we are concerned that the definition of a T1 and T2 arrangement improperly covers contractual agreements with a university that are in no way related to steering students into particular products or services."
The full text of the letter can be found in CUToday.info’s The Gov here.