School Lunch Fees Burden Families, Raise Concerns at CFPB
The Consumer Financial Protection Bureau (CFPB) is scrutinizing the fees parents pay to deposit money into their children's school lunch accounts. The agency found that some parents pay up to 60 cents in fees for every dollar deposited, with these fees potentially reaching tens of millions of dollars for payment processors.
The CFPB report analyzed data from the top five online payment processors used by schools. It revealed flat fees ranging from $1 to $3.25 per transaction and percentage fees between 3.5% and 4.58% per deposit. These fees can add up quickly, especially for families who make frequent deposits.
"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. "This report will help school districts avoid contracts with financial firms that harvest excessive fees from families who purchase school lunch."
The report highlights the disproportionate impact of these fees on low-income families. While families paying full price for lunches might incur transaction fees of 8 cents per dollar spent, those qualifying for reduced-price lunches could end up paying as much as 60 cents per dollar. This translates to roughly $72 a year for 180 days of lunches plus $42 in fees for families making two monthly deposits.
The CFPB estimates that payment processors collect between $28 million and $92 million in fees from families paying full fare for lunch and between $1.9 million and $10.2 million from those paying reduced prices. These estimates are based on the assumption that parents make between three and 18 deposits per year.
In addition to transaction fees, parents may also face program fees when opening an account or convenience fees for transferring funds between accounts. The report notes that families often have little choice in the payment platform offered by their school district and may be vulnerable to harmful practices that violate federal consumer protection laws.
Schools participating in the USDA's National School Lunch Programs are required to offer a fee-free payment option and inform parents about all payment options and associated fees. However, the CFPB found that schools and processors frequently fail to post information about free payment methods, making them less accessible than electronic options.
The report concludes that families may be paying more in fees than they would choose to if they had access to convenient and affordable payment options. The CFPB recommends that schools and payment processors take steps to improve transparency, reduce fees, and ensure families have access to free payment methods.