ED Request for Information on T1 and T2 Arrangement Disclosures
By Jill Desjean, Policy & Federal Relations Staff
On May 9, the Department of Education (ED) published in the Federal Register (FR) a request for information (RFI) soliciting stakeholder feedback regarding a proposed template to meet disclosure requirements for student financial accounts related to Tier 1 (T1) and Tier 2 (T2) arrangements. The disclosure requirements, which become effective on July 1, were included in October 30, 2015 cash management final regulations that established the T1 and T2 categories to define arrangements in which a school contracts with a third-party financial service provider to perform functions associated with processing direct Title IV payments on its behalf, or in which a school contracts with a third party that markets financial accounts directly to students.
The proposed template would implement the requirement for institutions to disclose major features and commonly assessed fees associated with accounts offered under T1 and T2 arrangements. The May 9 RFI is the result of ED coordination with the Consumer Finance Protection Bureau (CFPB) to ensure that the new disclosure requirements do not conflict with existing CFPB disclosures required for prepaid accounts under the Truth in Lending Act (Regulation Z).
The May 9 RFI specifies that institutions using CFPB’s appropriate short-form disclosure for prepaid accounts will be considered to be in compliance with the requirement to disclose major features and commonly assessed fees associated with prepaid cards offered under T1 and T2 arrangements, with the caveat that institutions choosing to use the CFPB short-form disclosure must also include language notifying students that they are not required to use any particular account to receive federal student aid.
For institutions that offer bank accounts rather than prepaid accounts under their T1 or T2 arrangements, or for institutions choosing not to use the CFPB short-form disclosure for prepaid accounts, ED proposes a template which closely resembles the CFPB disclosure and includes the required text notifying students that they do not need to use a T1 or T2 account in order to receive federal student aid. ED’s proposed template would essentially be a safe harbor, guaranteeing compliance with the regulations. Finally, institutions may opt to develop their own template or use one developed by their financial account provider. Those disclosures must include the major features, commonly assessed fees, and URL where the terms and conditions of each account may be obtained. Information that must be provided, whether using the proposed ED template or another format, includes, among other things, seven “static fees,” the number of additional types of fees charged, and the two highest revenue-generating of those additional fee types.
The National Association of College and University Business Officers (NACUBO) addressed this RFI in a May 15 blog post. Comments are requested by June 8, 2017 and commenters are asked to address, among other things, whether all relevant fee information is included in the disclosures; if any conflict exists regarding other regulatory requirements; whether students may find the disclosures confusing or unhelpful; and whether opportunities exist to further streamline the format of the template to reduce administrative burden.
Publication Date: 6/1/2017
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