The Hidden Cost of School Lunch: How Payment Processors are Nickel-and-Diming Families

In a troubling revelation, a mother in Bozeman, Montana, has uncovered a disturbing trend in the way school lunch payments are being processed, with families across the country facing exorbitant fees that often exceed the cost of the meal itself. This investigation delves into the lucrative and opaque world of K-12 payment processors, exposing a system that has been designed to extract maximum profits from vulnerable families, even as efforts to provide universal free school lunches gain momentum.

Uncovering the Hidden Fees: A Troubling Trend in School Lunch Payments

The Escalating Costs of Providing Lunch Money

Emily Krieger, a mother in Bozeman, Montana, began to notice a troubling trend in the fees she was paying to provide her two children with lunch money at their local public school. A cafeteria lunch at Emily Dickinson Elementary School costs $2.25, plus an additional $1 for a carton of milk. However, the cost of loading money onto her children's meal accounts, which are managed by a website called MySchoolBucks, had increased to a staggering $3.25 per transaction. This fee, which was labeled a "program fee" on the MySchoolBucks website, was now larger than the cost of an entire meal.

Uncovering the Destination of the Fees

Krieger's investigation revealed that the fees she was paying were not going towards her children's school, but rather to one of the largest payment processing companies in the world – a company that has been engaged in a years-long legal battle to protect the millions it makes by upcharging parents on lunch money. This discovery has raised serious questions about the fairness and transparency of the system, as families across the country are being subjected to these hidden costs.

The Dominance of Payment Processors in the K-12 Market

MySchoolBucks, a subsidiary of the financial behemoth Global Payments, is the largest of three payment processors that have come to dominate the increasingly lucrative K-12 payments market. These companies mediate millions of dollars in payments from students and their parents for everything from school lunches to athletic events. As MySchoolBucks has expanded its reach, it has drawn the attention of consumer-rights lawyers and federal regulators, who are now scrutinizing the company's business practices.

The Disproportionate Burden on Low-Income Families

According to a recent report by the Consumer Financial Protection Bureau, the payment processing companies are raking in more than $100 million a year from fees on lunch money alone. These fees are particularly burdensome on low-income families, who often can't afford to load a large lump sum of money onto a student's meal account and therefore pay more frequent flat transaction fees. Regulators found that vulnerable families may pay as much as $0.60 in fees for every $1 they spend on lunch, a staggering and disproportionate burden.

The Systemic Design to Extract Maximum Profits

Adam Rust, the director of financial services at the Consumer Federation of America, has described the payment processing system as one that has been "designed to nickel and dime hundreds of thousands of people once every other week." This hidden cost of "just living," as Rust puts it, has become a significant financial burden for families across the country, as they are forced to navigate a system that has been engineered to extract maximum profits from them.

Challenges to the Payment Processors' Practices

While MySchoolBucks has continued to expand its reach, signing more and more contracts each year and becoming a central growth driver for its parent company, Global Payments, challenges to its business practices are brewing. A consumer fraud lawsuit, which was brought in 2019 against the company, may soon be certified as a class-action suit, which could allow attorneys to pursue settlements on behalf of many more families. Additionally, the recent report by the CFPB, which documented the disproportionate burden on poor families, could represent a prelude to further enforcement action.

The Formidable Opposition and the Fight for Reform

Any attempts at reform, however, will come up against a company with annual revenues of more than $9 billion, and which spends hundreds of thousands of dollars a year lobbying lawmakers in Washington. Janet Varnell, one of the lead attorneys on the ongoing lawsuit against MySchoolBucks and the president of Public Justice, a pro-worker and pro-consumer legal advocacy group, has acknowledged the uphill battle they face. "There is every incentive in the world for [Global Payments] to throw everything they've got at us, as long as they possibly can, until a court makes them pay back parents," she said. This case, which Varnell describes as the "first of its kind," represents a critical juncture in the fight to hold these payment processors accountable and provide relief to the families they have been exploiting.