The CFPB Takes Aim At Processors’ Fees for School Lunches

The Consumer Financial Protection Bureau has issued a report highlighting what the agency calls “junk fees” charged by processors when parents add money to students’ school-lunch accounts. Such fees cost families upwards of $100 million a year, according to the CFPB.

In its study, the CFPB found that, on average, processors for school-lunch programs typically charge $2.37, or 4.4% of the total transaction, each time money is added into a payment account. Consumers may incur similar transaction fees when paying for other school-related expenses online, the CFPB notes.

Since school districts select the processor, consumers have no choice when it comes to paying the fees, the CFPB says, adding that these fees can be particularly costly to low-income families.

The CFPB surveyed 300 of the largest school districts around the country that offer digital payment options. One of the goals of the study was to raise awareness among school districts about the fees processors pass along to consumers, the agency says.

“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,” CFPB Director Rohit Chopra said in a statement. “Today’s report will help school districts avoid contracts with financial firms that harvest excessive fees from families who purchase school lunch.”

The CFPB’s research also revealed that, while more than 20 processors handle lunch-program payments for school districts, three players account for 67% of the market.

The study also found that eight of the K-12 payment processors are affiliated with larger companies that offer multiple school lunch payment products. “Generally, the leading K-12 payment platforms are well connected to large companies in the payments and financial-services sectors,” the study says. “For example, five are operated by independent sales organizations that provide payment-processing services.”

Agriculture Secretary Tom Vilsack said in a statement that, in light of CFPB’s findings, the USDA 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.”