Student Financial Aid Protection Stopped by Senate Banking Committee

Wednesday, July 10, 2013

Sacramento, CA -  On Wednesday July 3rd, students, faculty, college representatives, and consumer groups testified before the Senate Banking Committee in support of AB 1162 (Frazier), a bill to protect college students from high fees and poor consumer protections associated with the disbursement of their financial aid through credit balance refunds using debit cards. The legislation failed on a vote of 2 Yes votes, 3 No votes and 4 Non-recorded votes.

Student after student explained that fees and poor consumer protections associated with these contracts resulted in students bearing some costs directly, including per-swipe fees, inactivity fees, PIN based fees, ATM fees and more. It was also noted some of the contracted banks used aggressive marketing strategies to sway students to choose debit cards as their financial aid disbursement choice, with some of those debit cards containing weaker consumer protections.

The students saw little sympathy from the chair, Senator Lou Correa (the hearing may be viewed at After almost two hours of debate and public comments, AB 1162 was killed.  This legislation was forcefully opposed by the California Bankers Association, a powerful lobbying group that is the largest banking trade association in the State of California.  This bill was supported by the California State University, Community College League of California, California Federation of Teachers, CALPIRG, Consumers Union, Consumer Action, California State Student Association, Center for Responsible Lending, California Teacher Association and the California Student Aid Commission, in addition to many other organizations.

“I was very disappointed with the outcome of the committee hearing, but extremely excited to see students so passionate about public policy,” said Assemblymember Frazier. “After unveiling many of the byzantine banking practices, it is obvious that the banks get into these lucrative contracts for a reason. This legislation is too important to let die such an ugly death and I have many new ideas for the next legislative session.” 


As college and university budgets have shrunk, many higher education institutions contract with banks to disburse financial aid and issue credit balance refunds to students on debit cards. While many schools are obtaining revenues and reducing costs by outsourcing these services, the relationships between schools and banks have raised questions because students end up bearing costs directly through high fees.

Assemblymember Jim Frazier (D-Oakley) witnessed the poor banking practices that occur in the contracts and saw an opportunity to protect students with Assembly Bill 1162.  AB 1162 would have required college boards to adopt policies that best serve the needs of students when negotiating contracts with banks to disburse a student’s financial aid onto debit cards.

For more information about AB 1162, see the attached fact sheet.

To contact Assemblymember Jim Frazier please visit his website at or call his District Offices at 707-399-3011 or 925-778-5790.

CONTACT: Amy Warshauer, 916-319-2011,