RSSThe Consumer Financial Protection Bureau is scrutinizing the companies school districts use to process student lunch payments for allegedly taking advantage of underserved families while limiting market competition.
School lunch payment processing companies have too much control over fees assessed per transaction because they have a captive customer base, according to the July 25 report. Parents and caregivers allegedly don’t have any power over fee rates and lack the opportunity to evaluate less expensive options because contract decisions are made at the school-district level.
Processing expenses frequently include flat fees charged per transaction and disproportionately impact lower-income families that make frequent small payments compared with families who load more money into the account at once, according to the bureau.
Families with children eligible for means-tested reduced price lunch programs send $0.60 to payment processors for each $1 they spend — approximately $42 annually, according to the CFPB. Processors charge an average transaction fee of $2.37 or 4.4 percent to add money to school lunch accounts, which the CFPB said can cost families more than $100 million annually. While schools participating in the National School Lunch Program are required to provide fee-free options, the CFPB alleged that the benefit is sometimes not well advertised or accessible.
The report included an analysis of 300 of the largest public school districts in the country. Though more than 20 companies offer services to school districts, two-thirds of students are served by only three market leaders: MySchool Bucks, School Cafe and LINQ Connect, according to the report. Complex payment processor company structures and contracts allegedly protect companies from competition and make it less likely that school districts will negotiate fees for those services.
“Transaction fees and other types of junk fees can take an economic toll on American families just trying to pay for basic school expenses, including school lunch for kids,” said CFPB Director Rohit Chopra. “Today’s report will help school districts avoid contracts with financial firms that harvest excessive fees from families who purchase school lunch.”
U.S. Department of Agriculture Secretary Tom Vilsack said his agency “will review its policies and work with schools, state oversight agencies and the payment processors to ensure that all families have a clear and readily-available fee-free payment method.”
