On December 15, the Consumer Financial Protection Bureau published its annual report on joint credit card agreements between colleges and financial institutions. The report showed a nearly seventy percent (70%) decline in the number of agreements since Congress passed new disclosure requirements in 2009. In 2009, Congress passed the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act, which requires issuers to disclose to the CFPB the terms and conditions of any college credit card agreement, the number of new credit card accounts, and the compensation paid by issuers to institutions of higher education in the previous year. The CFPB’s findings illustrate the growing trend of partnerships between colleges and financial institutions shifting from credit cards to other financial products like debit and prepaid cards. In addition, the CFPB found that, among those colleges that do offer credit card agreements, most do not make those agreements readily accessible to students and families.
“Today, financial institutions are cutting more deals with colleges and universities to market student banking products that require less disclosure,” said CFPB Director Richard Cordray. “Schools and financial institutions should be up front on their website with students and their families about whether or not the school is being compensated to encourage students to use a specific account or card product.”
In sum, the CFPB’s annual report stated:
- College credit card agreements continue to decline: In recent years, there has been a steady decrease in both the number of college credit card agreements and open accounts. In 2009, some 1,045 agreements were in effect. Since the CARD Act went into effect, however, the number of agreements has decreased by nearly 70 percent, to the point that only 336 agreements were in effect by the end of 2013. Furthermore, credit card issuers paid over $84 million to colleges and universities in royalties and bonuses for agreements in 2009. That amount dropped to approximately $43 million in 2013.
- College debit and prepaid card agreements are now more common than credit card agreements: According to a report from the Government Accountability Office, there were at least 852 schools that had agreements with companies to market debit or prepaid cards to students in 2013. Unlike credit cards, these products do not have specific requirements in federal consumer financial laws to disclose their marketing partnerships.
- College credit card agreements are not readily accessible: The CFPB reviewed 35 college and university websites to determine if they made their credit card agreements easy for students and families to find and access. The Bureau found that 80 percent of these institutions – 28 out of 35 – do not put their agreements, or information about how to request them, on their websites.
Additionally, the CFPB is closely monitoring the marketing arrangements colleges and universities have with financial institutions related to deposit accounts, prepaid cards, debit cards, and other financial products. Investigations by the GAO, the Department of Education’s Inspector General, and others have raised numerous concerns about conflicts of interest in these deals and their impact on students.