On December 16, the Consumer Financial Protection Bureau sent warning letters to 17 colleges directing them to improve disclosure of school-sponsored credit card agreements, based on deficiencies identified in a recent agency investigation. According to the CFPB, more than 10 million college students attend a school that has made a deal with a financial institution where the college helps with or allows the promotion of debit or prepaid cards. These products are often endorsed with a college logo or linked to a student identification card. The Department of Education and other regulators have expressed concern over the marketing practices and consumer risk associated with college-sponsored financial products, which may have high or unusual fees.
Among the issues the CFPB identified were:
- Four out of five colleges did not disclose their credit card marketing contracts on their website – Of the 25 colleges in the CFPB’s sample, 20 did not disclose their contracts on their website. Only seven of these 20 schools published information for the public on how to obtain the agreements—but only two of these schools ultimately provided the agreements upon request.
- More than two-thirds of the schools did not provide access to agreements upon request – Of the 20 colleges that did not post agreements on their website, only three provided agreements upon request as required by law. In addition, the Bureau found that most of the schools that published specific instructions for requesting agreements failed to provide access to agreements, even when borrowers followed these instructions.
To promote increased protections for students in the school-sponsored debit and prepaid market, the CFPB also is releasing a Safe Student Account Toolkit to help colleges and universities avoid promoting financial accounts with surprise fees. A copy of the letter sent to these schools can be found here. The college credit card agreements report is available here.