Parents might need to think twice before trusting their children's school cafeteria.
American families are facing some unexpected hidden "junk fees," according to a new report from the Consumer Financial Protection Bureau (CFPB).
"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 Newsweek. "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."
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The report looked at 300 of the largest public school districts and revealed that payment processing companies that help school districts process children's school lunch payments often tack on junk fees to parents who have no option 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 in a statement. "Today's report will help school districts avoid contracts with financial firms that harvest excessive fees from families who purchase school lunch."
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Roughly 30 million children depend on their school meals for a substantial portion of their nutrition, and the extra fees likely hurt low- to middle-income Americans who do not qualify for free or reduced lunch the most.
"This is one of those situations where students, their parents and the schools are stuck between a rock and a hard place," Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, told Newsweek.
"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 said the U.S. Department of Agriculture would review its policies and work with schools, oversight agencies and the payment processors themselves to "ensure that all families have a clear and readily available fee-free payment method."
The report revealed that the majority of school districts use just three payment processing companies, which often tack on fees to add money to students' lunch accounts. This costs parents more than $100 million collectively each year.
Typically, the payment processor adds a 4.4 percent fee of the total transaction whenever money is added to an account.
"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."
Beene said because reduced lunch prices are meant to benefit families struggling to be above the poverty line, the fees can be argued as "excessive."
"It would more than likely be an argument for legislators to take up to create real change," Beene said. "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."
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