In 2018, Luvleen Sidhu, founder of BankMobile, sat on the floor of the New York Stock Exchange and told Cheddar, a news site geared towards millennials, that she wanted millions, including college students, to open accounts at her online financial services company.
Sidhu’s talk of her company’s social mission is also being questioned by regulators and consumer advocates who are concerned about its approach to college students. The company signs those students up through partnerships with schools. Though not a household name, BMTX distributes government funds critical to hundreds of thousands of students who use the money to pay for rent, food and other bills. Advocates say the company, which held roughly 70% of the college-sponsored bank accounts on the nation’s campuses, in the sample the CFPB reviewed, isn’t scrutinized closely enough by regulators charged with upholding the Department of Education’s campus banking rules and other consumer protection regulations.
Sidhu declined an interview request, but in written responses to questions from MarketWatch, a BMTX spokesperson defended the company’s practices and said the company complies with the Department of Education’s regulations surrounding its products. “We get to ask these students that are receiving these funds, ‘do they want to ACH to an existing bank account?’” Sidhu said, using the industry term for a bank transfer, “or do they want to open a very compelling, competitively positioned, student-focused BankMobile checking account?”
“There is an assumption that if they are putting their stamp on it that it is not a bad deal for most people,” Dalié Jiménez, a professor at the University of California, Irvine School of Law, said of colleges.
“BMTX provides this additional service to help ensure our college and university partners meet their regulatory obligations,” the spokesperson wrote. The spokesperson added that every two years schools are required to ensure that the fees associated with the BMTX account offered to students are “consistent with or below” market rates.
“When I would ask people at the bursar’s office or the financial aid office for more information about this company, they were super palms up, flippant, had no answer for me besides ‘just go to the website,’” she said. “You’re basically working with this company or you’re getting nothing and you’re screwed and it’s really aggravating.”
Nicole Burgin, a spokesperson for Brooner’s former college, TCC, said the school couldn’t speak to the details surrounding Brooner’s experience, “but we believe it is an isolated situation.” BM Technologies processed just under 24,500 disbursements on behalf of TCC during the 2022-2023 academic year and 8% opted to receive their refund in a BankMobile account, compared to 81% who used an existing bank account, according to Burgin. The other 11% received a paper check, Burgin wrote.
Baez, 31, said she never received her bank card from BMTX, so when her refund money hit her account it was difficult to access. The company would give her a temporary card she could use through her phone, but it expired after two weeks. Baez, a single mom, needed the funds to pay her rent and other bills. So Baez said she called the company multiple times to get them to send her a new card.
What’s more, the efficiency promised through BMTX never materialized. “If I would have just let them deposit in my bank account,” she said of her school, “I would have had access to my funds faster.” To solve that problem for BankMobile, the elder Sidhu told the Wall Street Journal he hoped to build off a relationship between Customers Bank and Higher One, a firm that partnered with universities to provide students with their financial-aid refunds. By the time the Sidhus launched the BankMobile app in 2015, Customers had access to 1.2 million student checking accounts and ATMs at 800 universities through the partnership.
Rohit Chopra who, at the time had recently stepped down from his job as the student-loan ombudsman at the CFPB, said the enforcement action, “put the nail in the coffin of their broken business model.” “Schools should think twice before partnering with companies that recklessly violate the rights of their students,” Chopra said at the time. He’s now the CFPB’s director.