CFPB Calls for Greater Transparency in Campus Card Agreements (Dec. 16, 2014)
The CFPB is calling for greater transparency from colleges and financial institutions when they enter agreements to offer prepaid or debit products to students. The agency reports that while agreements between colleges and credit card issuers to market credit cards on campus have been declining steadily the past several years, debit and prepaid card agreements have become more common. And, the CFPB is concerned that it’s not always clear to students and parents whether colleges receive a financial incentive in connection with such programs, according to the agency’s annual Congressional report required by the CARD Act.
In 2009, approximately 1,045 campus credit card agreements were in effect. That number has decreased by nearly 70 percent since the CARD Act went into effect, requiring credit card issuers to report to the CFPB the terms and conditions of any college credit card agreement with an institution of higher education. Only 336 agreements were in effect by the end of 2013, according to the CFPB. Credit card issuers paid more than $84 million to colleges and universities in royalties and bonuses for agreements in 2009, a total that dropped to less than $45 million in 2013.
The CFPB reports that debit and prepaid card agreements are now more common than credit card agreements. The CFPB sited a report from the Government Accountability Office indicating there were 2.5 times more (more than 850) agreements between colleges and 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, according to the bureau.
“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 Websites 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.”
Click here for the CFPB’s full report on college card agreements.
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