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[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[S. 2385 Introduced in Senate (IS)]

113th CONGRESS
  2d Session
                                S. 2385

To amend the Higher Education Act of 1965 and the Truth in Lending Act 
to provide for disclosure and codes of conduct with respect to consumer 
  financial products or services and institutions of higher education.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                              May 22, 2014

  Mr. Harkin (for himself, Mr. Durbin, and Ms. Warren) introduced the 
 following bill; which was read twice and referred to the Committee on 
                 Health, Education, Labor, and Pensions

_______________________________________________________________________

                                 A BILL

 
To amend the Higher Education Act of 1965 and the Truth in Lending Act 
to provide for disclosure and codes of conduct with respect to consumer 
  financial products or services and institutions of higher education.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Protecting Aid for Students Act of 
2014''.

SEC. 2. DISBURSEMENT OF CREDIT BALANCE.

    Part G of title IV of the Higher Education Act of 1965 (20 U.S.C. 
1088 et seq.) is amended by adding at the end the following:

``SEC. 493E. DISBURSEMENT OF CREDIT BALANCE.

    ``(a) Credit Balance.--In this section, the term `credit balance' 
means the amount of program funds under this title credited to a 
student's ledger account at the institution of higher education that 
exceed the amount assessed the student by the institution for allowable 
institutional charges, as defined by the Secretary.
    ``(b) Establishment of System for Disbursement.--Not later than 3 
years after the date of enactment of the Protecting Aid for Students 
Act of 2014, each institution of higher education that enrolls a 
student who receives a grant or loan under this title shall establish a 
system for the disbursement of credit balances in accordance with 
subsection (c).
    ``(c) Electronic Payment System.--
            ``(1) In general.--Each institution of higher education 
        described in subsection (b) shall establish a system for 
        disbursement of credit balances through electronic payments to 
        a deposit account or a general use prepaid card with the 
        protections afforded under the Electronic Fund Transfer Act (15 
        U.S.C. 1693 et seq.).
            ``(2) No preferred financial institution or denial or 
        delay.--In carrying out the system under paragraph (1), an 
        institution of higher education shall not--
                    ``(A) require or encourage a student to select a 
                particular financial institution to which an electronic 
                payment under this section shall be made; or
                    ``(B) deny or cause a delay in the disbursement of 
                credit balances based on the selection by a student of 
                a particular financial institution.
    ``(d) Distribution Options.--
            ``(1) Pilot program.--The Secretary of Education, in 
        consultation with the Secretary of the Treasury and the 
        Director of the Bureau of Consumer Financial Protection, shall 
        conduct a pilot program on providing students with the option 
        of receiving credit balances, through the electronic payment 
        system of the institution of higher education in accordance 
        with subsection (c), by using the Treasury Direct Express 
        system established under section 3336 of title 31, United 
        States Code, or through any other low-cost alternative as 
        determined by the Secretary.
            ``(2) Implementation.--If the Secretary of Education, after 
        conducting the pilot program described in paragraph (1), 
        determines that allowing students with credit balances to use 
        any option described in such paragraph is in the best interest 
        of students, the Secretary shall take such actions as are 
        necessary to provide any such option to students, which may 
        include entering into agreements with the Secretary of Treasury 
        or other entity to implement this paragraph.''.

SEC. 3. CODE OF CONDUCT IN AFFILIATED CONSUMER FINANCIAL PRODUCTS OR 
              SERVICES.

    Part B of title I of the Higher Education Act of 1965 (20 U.S.C. 
1011 et seq.) is amended by adding at the end the following:

``SEC. 124. CODE OF CONDUCT IN AFFILIATED CONSUMER FINANCIAL PRODUCTS 
              OR SERVICES.

    ``(a) Definitions.--In this section:
            ``(1) Affiliated.--
                    ``(A) In general.--The term `affiliated', when used 
                with respect to a consumer financial product or service 
                and an institution of higher education, means an 
                association between such institution and product or 
                service resulting from--
                            ``(i) the name, emblem, mascot, or logo of 
                        the institution being used with respect to such 
                        product or service; or
                            ``(ii) some other word, picture, or symbol 
                        readily identified with the institution in the 
                        marketing of the consumer financial product or 
                        service in any way that implies that the 
                        institution endorses the consumer financial 
                        product or service.
                    ``(B) Rule of construction.--Nothing in 
                subparagraph (A) shall be construed to deem an 
                association between an institution of higher education 
                and a consumer financial product or service to be 
                affiliated if such association is solely based on an 
                advertisement by a financial institution that is 
                delivered to a wide and general audience consisting of 
                more than enrolled students at the institution of 
                higher education.
            ``(2) Associated individual.--The term `associated 
        individual', when used with respect to an institution of higher 
        education, means an individual who is--
                    ``(A) an officer of such institution of higher 
                education;
                    ``(B) an employee or agent of the institution of 
                higher education who is involved in the contracting, 
                approval, analysis, or decisionmaking process for an 
                affiliated consumer financial product or service; or
                    ``(C) an employee or agent of the institution of 
                higher education involved in the marketing or 
                solicitation process pertaining to an affiliated 
                consumer financial product or service.
            ``(3) Consumer financial product or service.--The term 
        `consumer financial product or service' has the meaning given 
        the term in section 1002 of the Consumer Financial Protection 
        Act of 2010 (12 U.S.C. 5481).
            ``(4) Financial institution.--The term `financial 
        institution' has the meaning given the term in section 140B of 
        the Truth in Lending Act.
            ``(5) Institution of higher education.--The term 
        `institution of higher education' means an institution of 
        higher education as defined in section 102.
    ``(b) Code of Conduct.--Notwithstanding any other provision of law, 
no institution of higher education that is affiliated with a consumer 
financial product or service shall be eligible to receive funds or any 
other form of financial assistance under this Act, unless the 
institution--
            ``(1) develops a code of conduct with respect to affiliated 
        consumer financial products or services with which associated 
        individuals shall comply that--
                    ``(A) prohibits a conflict of interest with the 
                responsibility of an associated individual with respect 
                to such affiliated consumer financial product or 
                services;
                    ``(B) requires each associated individual to act in 
                the best interest of the students enrolled at the 
                institution of higher education in carrying out their 
                duties; and
                    ``(C) at a minimum, is aligned with the 
                requirements and prohibitions described under 
                subsections (c) through (g);
            ``(2) publishes such code of conduct prominently on the 
        institution's website; and
            ``(3) administers and enforces such code by, at a minimum, 
        requiring that all of the institution's associated individuals 
        be annually informed of the provisions of the code of conduct.
    ``(c) Ban on Revenue-Sharing Arrangements.--
            ``(1) Prohibition.--An institution of higher education that 
        is affiliated with a consumer financial product or service 
        shall not enter into any revenue-sharing arrangement with the 
        financial institution.
            ``(2) Definition.--In this subsection, the term `revenue-
        sharing arrangement'--
                    ``(A) means an arrangement between an institution 
                of higher education and a financial institution under 
                which--
                            ``(i) the financial institution provides or 
                        issues a consumer financial product or service 
                        to students attending the institution of higher 
                        education;
                            ``(ii) the institution of higher education 
                        recommends, promotes, sponsors, or otherwise 
                        endorses the financial institution, or the 
                        consumer financial products or services offered 
                        by the financial institution; and
                            ``(iii) the financial institution pays a 
                        fee or provides other material benefits, 
                        including revenue or profit sharing, to the 
                        institution of higher education in connection 
                        with the consumer financial products or 
                        services provided to students of the 
                        institution of higher education; and
                    ``(B) does not include an arrangement under which a 
                financial institution pays a fair market price to an 
                institution of higher education for the advertising or 
                marketing of the financial institution to the general 
                public by the institution of higher education.
    ``(d) Gift Ban.--
            ``(1) Prohibition.--No associated individual of an 
        institution of higher education shall solicit or accept any 
        gift from a financial institution that has a consumer financial 
        product or service with which the institution is affiliated.
            ``(2) Definition of gift.--
                    ``(A) In general.--In this subsection, the term 
                `gift' means any gratuity, favor, discount, 
                entertainment, hospitality, loan, or other item having 
                a monetary value of more than a de minimus amount. The 
                term includes a gift of services, transportation, 
                lodging, or meals, whether provided in kind, by 
                purchase of a ticket, payment in advance, or 
                reimbursement after the expense has been incurred.
                    ``(B) Exceptions.--The term `gift' shall not 
                include any of the following:
                            ``(i) Standard material, activities, or 
                        programs on issues related to a consumer 
                        financial product or service or financial 
                        literacy, such as a brochure, a workshop, or 
                        training. Such material, training, or program 
                        shall not promote a product or service of any 
                        specific financial institution.
                            ``(ii) Food, refreshments, training, or 
                        informational material furnished to an 
                        associated individual as an integral part of a 
                        training session that is designed to improve 
                        the service of a financial institution to the 
                        institution of higher education, if such 
                        training contributes to the professional 
                        development of the associated individual.
                            ``(iii) Favorable terms, conditions, and 
                        borrower benefits on a consumer financial 
                        product or service provided to all employees of 
                        the institution of higher education if such 
                        terms, conditions, or benefits are comparable 
                        to those provided to all students of the 
                        institution.
                            ``(iv) Philanthropic contributions to an 
                        institution of higher education from a 
                        financial institution that are unrelated to the 
                        affiliated consumer financial product or 
                        service or the financial institution in general 
                        or any contribution from the financial 
                        institution that is not made in exchange for 
                        any advantage related to the financial 
                        institution.
                    ``(C) Rule for gifts to family members.--For 
                purposes of this subsection, a gift to a family member 
                of an associated individual of an institution of higher 
                education shall be considered a gift to the associated 
                individual if--
                            ``(i) the gift is given with the knowledge 
                        and acquiescence of the associated individual; 
                        and
                            ``(ii) the associated individual has reason 
                        to believe the gift was given because of the 
                        official position of the associated individual.
    ``(e) Contracting Arrangements Prohibited.--
            ``(1) Prohibition.--No associated individual of an 
        institution of higher education shall accept from a financial 
        institution that has a consumer financial product or service 
        with which the institution is affiliated a fee, payment, or 
        other financial benefit (including the opportunity to purchase 
        stock) as compensation for any type of consulting arrangement 
        or other contract to provide services to the financial 
        institution or on behalf of the financial institution.
            ``(2) Rule of construction.--Nothing in this subsection 
        shall be construed as prohibiting the conduct of an individual 
        who is not an associated individual.
    ``(f) Ban on Staffing Assistance.--An institution of higher 
education shall not request or accept from a financial institution with 
which the institution has an affiliated consumer financial product or 
service any assistance with call center staffing, financial aid office 
staffing, or any other office or department of the institution of 
higher education.
    ``(g) Advisory Board Compensation.--Any associated individual of an 
institution of higher education who serves on an advisory board, 
commission, or group established by a financial institution that has a 
consumer financial product or service with which the institution is 
affiliated shall be prohibited from receiving anything of value from 
the financial institution, except that the individual may be reimbursed 
for reasonable expenses incurred in serving on such advisory board, 
commission, or group.''.

SEC. 4. REVENUE SHARING AND DISCLOSURE OF AFFILIATION.

    Chapter 2 of title I of the Truth in Lending Act (15 U.S.C. 1631 et 
seq.) is amended by adding at the end the following:

``SEC. 140B. PREVENTING UNFAIR AND DECEPTIVE MARKETING OF CONSUMER 
              FINANCIAL PRODUCTS AND SERVICES TO STUDENTS OF 
              INSTITUTIONS OF HIGHER EDUCATION.

    ``(a) Definitions.--In this section:
            ``(1) Affiliate.--The term `affiliate' means any person 
        that controls, is controlled by, or is under common control 
        with another person.
            ``(2) Affiliated.--
                    ``(A) In general.--The term `affiliated', when used 
                with respect to a consumer financial product or service 
                and an institution of higher education, means an 
                association between such institution and product or 
                service resulting from--
                            ``(i) the name, emblem, mascot, or logo of 
                        the institution being used with respect to such 
                        product or service; or
                            ``(ii) some other word, picture, or symbol 
                        readily identified with the institution in the 
                        marketing of the consumer financial product or 
                        service in any way that implies that the 
                        institution endorses the consumer financial 
                        product or service.
                    ``(B) Rule of construction.--Nothing in 
                subparagraph (A) shall be construed to deem an 
                association between an institution of higher education 
                and a consumer financial product or service to be 
                affiliated if such association is solely based on an 
                advertisement by a financial institution that is 
                delivered to a wide and general audience consisting of 
                more than enrolled students at the institution of 
                higher education.
            ``(3) Consumer financial product or service.--The term 
        `consumer financial product or service' has the meaning given 
        the term in section 1002 of the Consumer Financial Protection 
        Act of 2010 (12 U.S.C. 5481).
            ``(4) Financial institution.--The term `financial 
        institution' means--
                    ``(A) any person that engages in offering or 
                providing a consumer financial product or service; and
                    ``(B) any affiliate of such person described in 
                subparagraph (A) if such affiliate acts as a service 
                provider to such person.
            ``(5) Institution of higher education.--The term 
        `institution of higher education' has the meaning given the 
        term in section 102 of the Higher Education Act of 1965 (20 
        U.S.C. 1002).
            ``(6) Person.--The term `person' means an individual, 
        partnership, company, corporation, association (incorporated or 
        unincorporated), trust, estate, cooperative organization, or 
        other entity.
            ``(7) Revenue-sharing arrangement.--The term `revenue-
        sharing arrangement'--
                    ``(A) means an arrangement between an institution 
                of higher education and a financial institution under 
                which--
                            ``(i) a financial institution provides or 
                        issues a consumer financial product or service 
                        to college students attending the institution 
                        of higher education;
                            ``(ii) the institution of higher education 
                        recommends, promotes, sponsors, or otherwise 
                        endorses the financial institution, or the 
                        consumer financial products or services offered 
                        by the financial institution; and
                            ``(iii) the financial institution pays a 
                        fee or provides other material benefits, 
                        including revenue or profit sharing, to the 
                        institution of higher education, or to an 
                        officer, employee, or agent of the institution 
                        of higher education, in connection with the 
                        consumer financial products and services 
                        provided to college students attending the 
                        institution of higher education; and
                    ``(B) does not include an arrangement under which a 
                financial institution pays a fair market price to an 
                institution of higher education for the advertising or 
                marketing of the financial institution to the general 
                public by the institution of higher education.
            ``(8) Service provider.--The term `service provider'--
                    ``(A) means any person that provides a material 
                service to another person in connection with the 
                offering or provision by such other person of a 
                consumer financial product or service, including a 
                person that--
                            ``(i) participates in designing, operating, 
                        or maintaining the consumer financial product 
                        or service; or
                            ``(ii) processes transactions relating to 
                        the consumer financial product or service 
                        (other than unknowingly or incidentally 
                        transmitting or processing financial data in a 
                        manner that such data is undifferentiated from 
                        other types of data of the same form as the 
                        person transmits or processes); and
                    ``(B) does not include a person solely by virtue of 
                such person offering or providing to another person--
                            ``(i) a support service of a type provided 
                        to businesses generally or a similar 
                        ministerial service; or
                            ``(ii) time or space for an advertisement 
                        for a consumer financial product or service 
                        through print, newspaper, or electronic media.
    ``(b) Disclosure of Affiliation.--
            ``(1) Reports by financial institutions.--
                    ``(A) In general.--Not later than 180 days after 
                the date of enactment of the Protecting Aid for 
                Students Act of 2014, and annually thereafter, each 
                financial institution shall submit a report to the 
                Bureau containing the terms and conditions of all 
                business, marketing, and promotional agreements that 
                the financial institution has with any institution of 
                higher education, or an alumni organization or 
                foundation that is an affiliate of or related to an 
                institution of higher education, relating to any 
                consumer financial product or service offered to 
                college students at institutions of higher education.
                    ``(B) Details of report.--The information required 
                to be reported under subparagraph (A) includes--
                            ``(i) any memorandum of understanding 
                        between or among the financial institution and 
                        an institution of higher education, alumni 
                        association, or foundation that directly or 
                        indirectly relates to any aspect of an 
                        agreement referred to in subparagraph (A) or 
                        controls or directs any obligations or 
                        distribution of benefits between or among the 
                        entities; and
                            ``(ii) the number and dollar amount 
                        outstanding of consumer financial products or 
                        services accounts covered by any such agreement 
                        that were originated during the period covered 
                        by the report, and the total number and dollar 
                        amount of consumer financial products or 
                        services accounts covered by the agreement that 
                        were outstanding at the end of such period.
                    ``(C) Aggregation by institution.--The information 
                required to be reported under subparagraph (A) shall be 
                aggregated with respect to each institution of higher 
                education or alumni organization or foundation that is 
                an affiliate of or related to the institution of higher 
                education.
            ``(2) Reports by bureau.--The Bureau shall submit to 
        Congress, and make available to the public, an annual report 
        that lists the information submitted to the Bureau under 
        paragraph (1).
            ``(3) Electronic disclosures.--
                    ``(A) Posting agreements.--Each financial 
                institution shall establish and maintain an Internet 
                site on which the financial institution shall post the 
                written agreement between the financial institution and 
                the institution of higher education for each affiliated 
                consumer financial product or service.
                    ``(B) Financial institution to provide contracts to 
                the bureau.--Each financial institution shall provide 
                to the Bureau, in electronic format, the written 
                agreements that it publishes on its Internet site 
                pursuant to this paragraph.
                    ``(C) Record repository.--The Bureau shall 
                establish and maintain on its publicly available 
                Internet site a central repository of the agreements 
                received from financial institutions pursuant to this 
                paragraph, and such agreements shall be easily 
                accessible and retrievable by the public.
                    ``(D) Exception.--This paragraph shall not apply to 
                individually negotiated changes to contractual terms, 
                such as individually modified workouts or 
                renegotiations of amounts owed by an institution of 
                higher education.
    ``(c) Prohibition of Revenue-Sharing Arrangement.--A financial 
institution that offers a consumer financial product or service that is 
affiliated with an institution of higher education may not enter into a 
revenue-sharing arrangement with the institution of higher education.
    ``(d) Rule of Construction.--Nothing in this section shall be 
construed to prohibit a financial institution from establishing a 
consumer product or service affiliated with an institution of higher 
education if --
            ``(1) the consumer product or service will--
                    ``(A) assist college students in reducing costs or 
                fees associated with the use of consumer financial 
                products or services;
                    ``(B) increase consumer choice; and
                    ``(C) enhance consumer protections; and
            ``(2) the financial institution is in compliance with the 
        requirements of this Act.''.
                                 <all>
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