Colleges and banks have long worked together to sell financial products to students, and in some cases the practice has exposed this potentially lucrative — but vulnerable — group of consumers to credit cards, bank accounts and debit cards with high fees.

Regulators, empowered by new laws, have tried to clamp down on this behavior in recent years. Those efforts have helped, but students are still paying tens of millions in fees to financial institutions, many of whom are paying their colleges for the opportunity to sell to them, according to a roughly year-old report from the Consumer Financial Protection Bureau released publicly for the first time last week.

“ ‘The hundreds of dollars of fees that students are paying on campus can also be the difference between staying in school or being forced to drop out for financial concerns.’ ” — — Seth Frotman, former CFPB student loan ombudsman, now executive director of the Student Borrower Protection Center

That “unholy alliance,” as some regulators have described it, between schools and financial institutions is costing students. At colleges where banks pay the schools to promote the accounts, students pay more on average in fees.

The CFPB report was originally drafted towards the end of 2017 and sent to the Department of Education in February of this year, but only made public last week in response to a Freedom of Information Act request. In an email, the CFPB declined to comment on “unfinished, unpublished studies.”

“Anyone that looks at this data and the extent to which large banks continue to team up with colleges and universities to gouge the student body with overdraft fees should be outraged,” said Seth Frotman, the former student loan ombudsman at the CFPB and the executive director of the Student Borrower Protection Center, an advocacy group.

Frotman resigned from his post at the CFPB earlier this year. In a scathing resignation letter, he cited the suppression of the report as evidence that the agency’s political leadership was protecting the interests of financial companies at the expense of students and borrowers.

Students tended to pay more fees when financial institutions paid their colleges to promote the accounts

During the 2016-2017 academic year, students using college-endorsed debit or prepaid accounts paid $27,600,000 in account fees, according to the report. And students tended to pay more fees when financial institutions paid their colleges to promote the accounts. That could include creating products that feature co-branding between the company and the school, allowing the company to email students to market the product to them, permitting company representatives to set up a table during orientation and sharing revenue with the companies when students sign up.

At the 457 colleges where schools received $0 in compensation from the banks, account holders paid an average of $11.63 for the year of the study period, the report found. At the 116 schools that received $16,657,800 in total from banks to promote these products, account holders paid $36.52 on average.

The bank where student account-holders had the highest fees was Wells Fargo WFC, -3.46% . There, active-account holders paid $46.99 in fees during a 12-month period, the report found. Even though Wells Fargo held less than one-quarter of the total college-endorsed accounts, their account holders paid roughly half of the fees, according to data from the report.

Jim Seitz, a Wells Fargo spokesman, said students aren’t charged monthly fees to use their campus banking accounts. Any fees a campus-account holder incurs would be the related to the way they use the account, Seitz said. For example, at some campuses, students may have more complex banking needs — like using wire transfers, purchasing more checks, using more out-of-network ATMs, etc. — that could result in them paying fees. It’s also possible account holders incurred the fees through overdrawing their accounts.

Seitz noted that Wells Fargo has taken steps to help account-holders avoid overdrafting, including by sending them an alert when their balance goes below zero and offering a service called “overdraft rewind,” which counts a direct deposit towards any overdraft from the day before. Ultimately, it’s important to the bank that campus account holders to have a good experience using the Wells Fargo product because “we want to build life long relationship with customers,” Seitz said.

“We feel strongly that the products and services that we offer are designed to serve students’ best interest,” he said.

Banks and colleges are required to take students’ financial interests into consideration

Still, evidence of any kind of fee on these types of accounts is troubling to consumer advocates for a number of reasons. For one, they suggest that banks and colleges are working together to sell a product of dubious benefit to students — a demographic desirable to banks because they’re often interacting with financial institutions for the first time, which offers potential for a lifetime relationship.

What’s more, the CFPB report notes, high average fee numbers are often indicative of a balance between two different types of students: relatively well-off students who are paying little or nothing at all in fees because they rarely overdraft and struggling students who continue to overdraft and pay high fees and for whom those fees can be a large financial shock.

“The hundreds of dollars of fees that students are paying on campus can also be the difference between staying in school or being forced to drop out for financial concerns,” Frotman said.

The Department of Education published rules in 2015 aimed at clamping down on these troubling practices. As part of the regulations, banks and colleges are required to work out deals that are “not inconsistent with the best financial interests” of students. One upside of the report is that the bulk of agreements between schools and financial institutions seem to fit that bill. At least half of students using a sponsored account at most colleges didn’t pay any fees, the study found.

“This is showing that the regulations are working and that with additional enforcement they can work even better,” Colleen Campbell, associate director of postsecondary education at the Center for American Progress, a left-leaning think tank, said of the report.

But the outliers still charging fees are troubling to Campbell, Frotman and others, particularly given that the Department of Education is proposing to offer a card and account product of its own to student loan borrowers.

“We shouldn’t move ahead with the program if we’re not already enforcing the rules that are on the books,” said Kaitlyn Vitez, the higher ed campaign director at U.S. PIRG, a consumer advocacy organization. “The letter of the law is that these deals need to be negotiated in students’ best interest and a $50 average fee is not that.”

Liz Hill, a Department of Education spokeswoman, had a different take. In an emailed statement, she wrote that the CFPB’s research “confirmed for us the importance of a fee-free payment card option for students.” She added that the report was “broader in scope” than the Department’s authority.

The Department’s proposed banking product for students is specific to an account and card borrowers might use to access their federal student aid. The 2015 regulations already require that companies offer these accounts with no fees to borrowers. The CFPB report encompasses both these products and broader banking products marketed to college students, which under the 2015 regulations must not be “inconsistent with the best financial interests” of students.

Any suggestion that the Department isn’t ensuring that schools follow these rules “is false,” Hill wrote in the email.

But Vitez said she’s troubled that officials at the Department of Education and the CFPB knew about this data for roughly a year and that these types of accounts continue to proliferate.

“That’s thousands more college students that have been taken advantage of by these deals,” she said. “We did them a real disservice.”