Another Senator Cautions ED Against Cash Management Rule Draft

By Katy Hopkins, Communications Staff 

Sen. Mike Crapo (R-ID) has sent the latest in a string of letters to the Department of Education (ED) that caution against broad and unclear draft rules for cash management and Title IV aid disbursements. Crapo, the ranking member on the Senate Committee on Banking, Housing, and Urban Affairs, said that ED’s draft proposed rules, which resulted in a lack of consensus in negotiated rulemaking, raise concerns that, left unaddressed, “would result in a rule that creates a backdoor and burdensome regulation on traditional banking products, which ultimately may force financial institutions to exit campus markets leading to diminished student choice, restricted convenience, and more unbanked young people.”

ED does not appear poised to hit the November 1 deadline with final text that would “get the rule right,” Crapo said.

As other members’ letters have noted, Crapo wrote that ED’s draft proposed rules include a broad definition of a “sponsored account,” which, as currently written, could even include bank accounts in which students never planned to receive Title IV aid. 

“As such, it would be impossible for financial institutions to discern which account is a ‘sponsored account’ and which one is not, leading to a presumption that most accounts are in fact ‘sponsored accounts’ and subject to the Department’s regulations” – which would be an overreach of ED’s statutory authority, Crapo said. “I am concerned,” he wrote, “the Department has taken certain policy positions without giving due regard to the current regulatory framework.”

The letter expresses three areas of concern:

  • Definitions seem to be faulty and overreaching.
  • ED failed to consult with banking regulators “even though the very product the Department is proposing to regulate ? a consumer's checking account ? is subject to myriad of existing Federal and state laws.”
  • The comment period is insufficient for ED “to sufficiently seek, obtain and consider stakeholders' input and work through all the challenges that its proposal creates in time to meet the November 1st deadline” required by law to impose an effective date of July 1, 2015. “A rule of this magnitude and complexity,” the letter asserts, “warrants a 90-day comment period following publication in the Federal Register.”

“While it may seem important to finalize this rule by November 1st, it is more important to get the rule right,” he noted in closing. 

 

Publication Date: 8/15/2014


You must be logged in to comment on this page.

Comments Disclaimer: NASFAA welcomes and encourages readers to comment and engage in respectful conversation about the content posted here. We value thoughtful, polite, and concise comments that reflect a variety of views. Comments are not moderated by NASFAA but are reviewed periodically by staff. Users should not expect real-time responses from NASFAA. To learn more, please view NASFAA’s complete Comments Policy.
View Desktop Version