Parents may want to reconsider trusting their children’s school cafeteria.
According to a new report from the Consumer Financial Protection Bureau (CFPB), American families are being charged unexpected “junk fees.”
“These fees are the sneaky charges tacked on when parents load money into their kids’ lunch accounts,” Michael Ryan, a finance expert and founder of michaelryanmoney.com, told media. They include transaction fees, service charges, and other costs that often fly under the radar. In my experience, many parents don’t even realize they’re paying them.”
The report examined 300 of the major public school districts and discovered that payment processing companies that assist school districts in processing children’s school lunch payments often charge unnecessary fees to parents who have no choice but to pay for their child’s lunch.
“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. “Today’s report will help school districts avoid contracts with financial firms that harvest excessive fees from families who purchase school lunch.”
Approximately 30 million children rely heavily on school meals for nutrition, and the additional expenses are projected to negatively impact low-to-middle-income Americans who do not qualify for reduced or free lunch.
Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, told the media, “This is one of those situations where students, their parents, and the schools are stuck between a rock and a hard place.”
“While they are a public resource, schools are like any other entity when it comes to charging for goods and services. Those payments have to be processed, and the schools have to pay for that service. As inconvenient as it may be, especially for low-income families, fees for processing payments are ‘hidden’ in most items we buy and pay for every day. School lunches are not unique.”
Agriculture Secretary Tom Vilsack stated that the US Department of Agriculture will review its policies and collaborate with schools, oversight agencies, and payment processors to “ensure that all families have a clear and readily available fee-free payment method.”
According to the survey, most school districts use only three payment processing companies, often charging fees to deposit funds into children’s lunch accounts. This costs parents more than $100 million per year. Every time money is added to an account, the payment processor typically charges a 4.4% fee.
“Because contracts are determined at a school-district level, families have no choice over which company they must use to add funds into online student lunch accounts,” the CFPB said in a release. “As a result, it may be especially difficult for families to avoid harmful practices, including those that may violate federal consumer protection law.”
According to Beene, because reduced launch rates are intended to support families attempting to rise above the poverty line, the fees can be considered “excessive.”
Beene stated, “It would more than likely be an argument for legislators to take up to create real change.” “Limiting these processing fees in situations like these may not seem like much at a few cents a day. But those cents add up over the course of years of a student’s school lifespan.“
