University of Minnesota’s deal with TCF Bank questioned

Too cozy? (MPR Photo / Jeffrey Thompson)

The University of Minnesota is front and center in a national news piece that questions the multimillion-dollar agreements between universities and banks.

The U.S. Consumer Financial Protection Bureau is looking into the deals to see whether they’re unfair to students. The suspicion is that the big banks are heavy-handed with overdraft charges, for example, and that universities gain financially by steering students to the accounts.

It’s not the first time the feds have looked into universities’ deals. In 2009, Congress cracked down on royalties paid by credit card companies for access to students.

Rohit Chopra, an assistant director at the agency, told ABC:

“As the market has shift toward new products, like checking accounts and student ID cards that double as debit cards, we wanted to make sure those same practices aren’t happening again.”

In the case of the University of Minnesota, ABC states that the school receives $34 for every student who opens up an account as part of an agreement worth more than $1 million a year.

It interviews 21-year-old student body President Mike Schmit, who said a friend of his was penalized multiple times — at $37 a pop — every time he overdrew his account. (That’s something that cash-strapped students often do, the story states. But a TCF spokesman told ABC such overdrafts are quite uncommon.)

U spokesman Chuck Tombarge told me the story was overblown. He pointed me to this statement and FAQ by the university.

What he stressed:

The TCF account is still “one of the best banking options” available to students in terms of no-fee services, he said.

Far fewer students have TCF accounts than the story reports — about 50 percent, instead of 85 percent, he said. Students are not required to get a TCF account linked to their U Card and must opt in to get one. The U also has U.S. Bank and Wells Fargo ATMs on campus, and has a U.S. Bank branch on the West Bank.

All of the money the U gets in the deal, he said, goes to students in the form of scholarships and student programs.

Tombarge said the U does receive money if students sign up,  but it’s not quite the $34-per-head “bounty” portrayed by ABC. He said the U gets a minimum of $1 million per year. But if the number of student, faculty and staff accounts multiplied by $34 exceeds that $1 million, the U keeps the difference.

The first time the U received that bonus since it the contract began in 1995, he said, was this past January — and it amounted to $415.

Tombarge told me:

“The point is: If the U was truly being really aggressive in trying to gain student accounts so that we could get more money, we’ve done a really poor job of it. … It took us almost 20 years to make $415 more dollars than our minimum payment.”

He said U officials sent information to the Consumer Financial Protection Bureau before the story ran, and offered to answer questions, but federal officials haven’t contacted them.

News of the TCF agreement with the U isn’t anything new.

MPR reported a few details — including TCF’s exclusive right to offer checking accounts accessible with the university’s photo ID card — after TCF notified more than 20 Iranian students that it would close their accounts. The Star Tribune also ran details while reporting on the bureau’s national inquiry.

You can read  the “U Card” agreement itself below. The main details from a summary provided by the U:

A student, staff or faculty member is not required to open a bank account as a condition of being issued a U Card.

A U Card may be used as a convenient cashless way to pay for goods and services using funds previously deposited in a declining balance account called Gopher GOLD, which is maintained by the University.

The University account access features of the U Card include: Gopher GOLD(TM) Value, FlexDine, Meal Plans, and the Student Account. If an individual chooses to open a checking account with TCF Bank, the U Card may also be used to access that account, marketed as a “U Card Checking Account,” and to get cash at TCF Bank ATMs.

The U Card also provides access to recreational facilities, the golf course, computer labs, and serves as a building access card.

As of October 31, 2012, there were approximately 30,677 active U Card Checking accounts. At the present time, the University receives approximately $1,000,000 per year in royalty payments.

The annual royalty payments from TCF associated with the U Card agreement have been spent in two areas: student programming initiatives, such as the Gophers After Dark Program (late-night sponsored activities) and Welcome Week, and scholarships for graduate, professional and undergraduate students.

TCF Bank also provides an additional $200,000 each year in marketing support. For the most recent year, 2012, a portion of the TCF Bank marketing funds supported the following student and departmental related programs and activities …..