The Consumer Finance Protection Bureau (CFPB) has released its annual report on marketing credit cards at colleges and universities, and it shows that the number of credit card agreements between schools and financial institutions continues to decline. However, the information about those agreements isn't always transparent, and schools and financial institutions are starting to shift toward debit and prepaid cards, which have fewer requirements for transparency.
“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 in a statement. “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.”
Schools and credit card companies have to disclose what's in their credit card agreements because of the Credit CARD Act of 2009 so students--and their parents--have a better, clearer understanding of the marketing relationships between schools and financial institutions, particularly since students are at the age where they may be getting their first credit card, and they may be making that decision on their own. This disclosure shows them just how much money schools are making from financial institutions from these agreements, as well as the terms and conditions of the card and how many new cards they issue.
This year's report looked at data from 2013 and found the number of higher education credit card programs--including school-affiliated organizations like alumni associations--and found that card agreements, accounts and payouts have all decreased, continuing a trend the CFPB has established.
When the CARD Act came into effect, there were over one thousand card agreements at these schools. That number is now down to 336. Likewise, the number of credit card accounts has fallen from over two million to about 950,000. Schools are also making less than half of what they used to, with payments from banks dropping from $85 million in 2009 to under $43 million in 2013.
The report also shows that the number of new accounts has increased, but most of that growth comes from alumni applying for new cards through alumni associations, not students getting new cards.
One of the other hopes that the CARD Act hoped to address was the clarity in the agreements schools and financial institutions have. Colleges and universities are supposed to make their credit card agreements accessible to students and parents, and they're also supposed to be easy to find. To test this, the CFPB looked at 35 schools' websites and found that 80 percent of their sample didn't have their agreements on their websites, nor did they say how people could request them. One point of data the CFPB did note in this report is that while the number of credit card agreements may be going down, efforts between higher educational institutions and financial service providers may be increasing in different kinds of financial products, like checking accounts, debit cards and prepaid cards. While the CFPB counted 448 credit card agreements, the Government Accountability Office (GAO) reported that there are at least 852 of these agreements for debit or prepaid cards. The CFPB, GAO and the Department of Education's Inspector General have all noted that transparency should be increased for these products as well.
To help students and parents understand the agreements between financial institutions and schools, the CFPB has a database of college credit card agreements on its website. It also reminds students that schools can't force students to sign up for specific banks or cards based on the agreements they have with financial institutions.
