CATrends: School Lunch Payment Processors

For parents who have spent the summer coming up with creative ways to keep their kids busy, the month of August presents another challenge: preparing their children for a return to the classroom.

On top of purchasing school supplies, filling out a mountain of forms and getting back into a morning routine, there’s an additional responsibility many parents may face: making sure their child has enough money in their online school lunch account so they don’t go hungry during the school day.

School districts across the country are increasingly going cashless, providing families the option to pay for school-related expenses like lunch, field trips and athletics online. But using these services isn’t typically free. The Consumer Financial Protection Bureau estimates that the fees routinely charged by payment processors for school lunch alone collectively cost families upwards of $100 million each year.

In recent years, several payment processing companies contracted by schools or districts to manage online payments have been accused of failing to adequately disclose their fees to families that use their platforms to upload funds to children’s school accounts.

For example, a lawsuit filed in January against RevTrak, which the complaint identifies as “one of the largest K-12 payment processors in the country, with over 1,300 school districts using its payment portal,” alleges that the company automatically adds a “Software Admin Fee” to every transaction at the very end of the checkout process.

Parents therefore face a coercive choice: either pay the unauthorized and undisclosed Software Admin Fee every time they make a school payment online, or refuse to pay the fee and leave their child without lunch money, unable to participate in field trips, or unable to satisfy required school fees. This is not a meaningful choice for parents; it is a hidden profit center for Defendant that parents are forced to pay in order to meet basic school-related obligations for their children.

Moreover, the lawsuit alleges that RevTrak misrepresents the “nature and purpose” of the fee by labeling it a “Software Admin Fee” when, in reality, the amount of the fee “far exceeds” the cost for processing the transaction.

The complaint against RevTrak, which is pending, also argues that the structure of the fee – either as a flat fee or a percentage of the transaction – disproportionately harms lower-income families.

In Plaintiff’s school district, the Software Admin Fee is charged to parents as a $2 flat fee regardless of the amount of the transaction. … for wealthy parents, who can afford to add hundreds of dollars to their children’s lunch accounts at a time, the fee works out to be a relatively small percentage of the amount added. For parents who live paycheck-to-paycheck and can only afford to add $ 10 or $20 at a time, however, the fee can amount to as much as 20%.

RevTrak isn’t the only K-12 payment processor that has been accused of engaging in deceptive drip pricing.

Lawsuits filed against MySchoolAccount (pending) and SchoolCafe (settled) similarly allege that the companies hide their fees until the end of transactions. These and other cases such as one against PayPAMS (voluntarily dismissed) also allege that the companies represent that the fees cover processing costs when the fee amounts are in excess of such costs.

Then there are payment processors or platforms that allegedly misrepresent that their fees are charged by the school when they’re actually the ones imposing the charges and pocketing the profits. Both EZSchoolPay and MySchoolBucks fall into this category.

While the lawsuit against EZSchoolPay was voluntarily dismissed and the details of any settlement that may have led to the dismissal have not been disclosed, the complaint against MySchoolBucks resulted in the company agreeing to pay more than $18 million to settle the case.

Yet the settlement did not require that MySchoolBucks change how it discloses and charges its fees.

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