Heartland Axes a Trio of Student Card Fees in Wake of Consumer Group Report

Citing “ever-increasing student college expenses,” Heartland Payment Systems Inc. reported on Tuesday that it would eliminate three fees on its student-aid prepaid card. Heartland’s move comes a few weeks after the U.S. Public Interest Research Group (U.S. PIRG), a prominent consumer advocacy group, issued a report highly critical of the fees and other charges on campus prepaid cards offered by banks or managed by non-bank financial firms such as Heartland.

Princeton, N.J.-based Heartland said it would eliminate a $30 dispute fee charge, a $1 bill-pay fee, and a 50-cent card-to-card transfer fee on its Acceluraid cards that double as student-aid disbursement vehicles and Discover-branded prepaid cards for general spending. Acceluraid is offered on 23 college campuses attended by about 112,000 students. Oklahoma-based Central National Bank issues the cards.

In a news release announcing the fee eliminations, Heartland chief executive Robert Carr doesn’t mention the May 30 U.S. PIRG report or its political repercussions. Carr does say Heartland’s fee structure was “substantially lower than the competition” and that “since our business model is not based on student fee income, we wanted to further decrease the potential financial burden on students by eliminating these specific fees.”

In an interview with Digital Transactions News, Heartland vice chairman Robert H.B. Baldwin Jr. said the report played a role in prompting the changes, though he disagrees with some of U.S. PIRG’s findings. “We took note of them … and don’t believe they are entirely on point in all of the comments,” Baldwin says. “But we did say, ‘are the fees really worthwhile in some cases? Can we figure out ways to reduce the burden on students even further?’”

Baldwin could not say how much revenue the eliminated fees generate, but he adds that the vast majority of the Acceluraid program’s revenues come from interchange.

Students can avoid fees by using alternative channels, especially the Internet, Baldwin says. Acceluraid cards, for example, charge 60 cents for ATM balance inquiries because Heartland pays a “hard cost” in the form of fees to electronic funds transfer networks to offer that service, he says. But balance inquires are free online, through an automated phone-based service, or even by text message. Account statements are free online but cost $10 if  students want a hard copy. Heartland typically also has one or two ATMs at its partner campuses that enable students to avoid some fees, Baldwin adds. Baldwin also notes that Heartland has never charged a point-of-sale debit card usage fee as some other providers have.

An official with Washington, D.C.-based U.S. PIRG did not respond to a Digital Transactions News request for comment. In the report titled, “The Campus Debit Card Trap,” the group called campus prepaid cards “wolves in sheep’s clothing” because of their fees and alleged lack of protections against financial loss.

Heartland, whose main business is merchant acquiring, is far from the largest player in the niche in which some prepaid cards also function as campus ID cards. The providers mentioned in the report offer cards on 878 campuses attended by 9 million students, although how many students actually have school-endorsed prepaid cards was not available. The biggest single provider is Higher One Holdings Inc., which has partnerships with 520 schools attended by 4.3 million students. (Higher One’s stock price fell 10% the day after the U.S. PIRG report came out.) The two biggest banks in the market are Wells Fargo & Co., which offers prepaid cards on 43 campuses attended by 2.06 million students, and U.S. Bancorp, the issuer on 51 campuses with 1.76 million students.

U.S. PIRG released the report at a time when the financial plight of college students is becoming a major political issue as tuition keeps rising, states continue to cut support for public universities, and more students are graduating heavily indebted. Senate Majority Whip Richard Durbin, D-Ill., Sen. Jack Reed, D-R.I., and U.S. Rep. Peter Welch, D-Vt., wrote to the heads of the 15 banks and other providers cited in the U.S. PIRG report urging them end the “egregious fees” on campus prepaid cards that often are used to distribute taxpayer-subsidized student aid. Durbin and another Congressman also urged the U.S. Department of Education and the Consumer Financial Protection Bureau to investigate the cards.

A Heartland spokesperson says the company has 23 more campuses contracted for Acceluraid, with rollouts pending.