Fintech bullies stole your kid’s lunch money

🌈 Abstract

The article discusses the issue of school lunch payment processors exploiting poor families by charging exorbitant fees, up to 60% of the money parents put into their children's accounts. It highlights how three dominant companies - Myschoolbucks, Schoolcafé, and Linq Connect - are essentially "stealing poor kids' lunch money" through these predatory practices, which violate USDA regulations.

🙋 Q&A

[01] The Exploitative Practices of School Lunch Payment Processors

1. What are the key issues raised in the article regarding school lunch payment processors?

• Three companies control the market for school lunch payments and take up to 60 cents out of every dollar poor kids' parents put into the system, amounting to $100 million per year.
• These payment processors charge high "junk fees" for every top-up to the students' accounts, disproportionately impacting low-income families who can't afford to make larger, less frequent payments.
• The fees charged by these processors are often much higher than the actual cost of processing the transactions, with per-transaction charges of up to $3.25 for an ACH transfer that costs $0.26-$0.50, or 4.58% for a debit/credit-card transaction that costs 1.5%.
• Schools are increasingly going cashless and forcing parents to use these payment processors, with no ability to choose an alternative provider.

2. How do these practices violate USDA regulations?

• The USDA, which provides and regulates the reduced-cost lunch program, bans schools from charging fees to receive its meals. Schools must allow kids to pay cash or top up their accounts with cash at the school without any fees.
• However, many schools refuse to handle cash, citing safety and security concerns, and often fail to advertise the fact that they accept cash or checks.
• The USDA also requires schools to publish the fees charged by processors, but most of the districts in the study violate this requirement.

3. What is the role of the Consumer Financial Protection Bureau (CFPB) in addressing this issue?

• The CFPB has the means, motive, and opportunity to take action against these exploitative practices by the school lunch payment processors.
• The CFPB has emerged as a powerful regulator, taking on corporate abuses that benefit average Americans, such as addressing scumbag landlords and predatory "Earned Wage Access" programs.
• However, there is concern that a Kamala Harris administration may undermine the CFPB's efforts, as some of her largest donors are demanding that she fire the heads of agencies like the CFPB and FTC that have been cracking down on corporate abuses.

[02] The Broader Implications and Potential Solutions

1. How does this issue fit into the broader context of corporate power and antitrust concerns?

• The article suggests that labor unions should publicly declare their support for the FTC, CFPB, and DOJ's antitrust efforts, as breaking up large companies and unionizing them is the best way to prevent these types of corporate predations.
• The article argues that the Democrats need to be more than just "The Party of Not Trump" and instead defend workers, parents, kids, and retirees from corporate exploitation.

2. What potential solutions or actions could be taken to address this issue?

• The CFPB has the power and responsibility to take action against the exploitative practices of the school lunch payment processors, as they have done in other areas of consumer protection.
• Schools should be required to accept cash payments and advertise this option to parents, in line with USDA regulations.
• Greater transparency and oversight of the fees charged by these payment processors is needed, with clear disclosure of the actual costs of processing transactions.
• Increased competition and choice in the school lunch payment processor market could help drive down fees and protect low-income families.