Junk fees hit a new low, the school lunch room

CFPB report claims that parents are getting ripped off by school lunch payment providers who are adding in 'junk fees' - ConsumerAffairs

Should you take advantage of the National School Lunch Program?

Junk fees on airline tickets, junk fees on internet bills, junk fees on… school lunches? That seems to be the case based on a new Consumer Financial Protection Bureau (CFPB) report on payment processing companies that assist school districts in processing children’s school lunch payments. 

In its review of 300 of the U.S.’ largest school districts, the CFPB came away with two issues these private companies have created for parents and students. One, they process payments made by parents who may be low-income and have limited, or zero payment alternatives -- meaning that because those customers are basically captive, those companies can pile on the fees. 

The second issue is that parents and caregivers have no control over fee rates and really nowhere else to go and shop for a better deal. 

In spite of the fact that more than 20 companies offer these services to school districts nationwide, the vast majority of enrolled students are served by just three market leaders. Their typical M.O. is to charge fees to add money to a student’s school lunch account, which may seem innocent enough, but collectively can cost families – and earn those companies – upwards of $100 million each year.

Among the companies it studied, the CFPB observed that the payment processors charge transaction fees of $2.37, or 4.4%, of the total transaction, on average, each time money is added into a payment account. 

Who are those companies? Here’s the CFPB’s list:

“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.”

USDA steps in to make things right

Agriculture Secretary Tom Vilsack agrees with the CFPB that adding fees on a kid or parent on something as basic as nutrition is a bit much. In turn, he has instructed the Agriculture Department (USDA) to review its policies and work with schools, state oversight agencies, and the payment processors to guarantee that all families have a clear and readily-available fee-free payment method. 

School food authorities participating in the National School Lunch Program will also be required to provide fee-free avenues to pay for school lunch. But parents need to know that these fee-free options are not always well advertised or accessible, so they’ll have to ask. 

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