When students apply for a school-sponsored credit card they may think they don’t have to read the fine print, but that might not always be the case. The Consumer Financial Protection Bureau (CFPB) has sent 17 colleges warning letters telling them to upgrade their disclosure protocols.
Why? During an investigation they found that they were not making marketing agreements available to students or the public even when asked. Schools are required to do so by the CARD Act.
“History tells us that when schools and financial institutions get together behind closed doors, students can pay a steep price,” said CFPB Director Richard Cordray. “The Bureau will continue to promote and enforce transparency across this market and stands ready to see that schools do the right thing on behalf of their students.”
The CFPB is mandated to give Congress a report each year about college credit card agreements, looking at the schools marketing partnerships with issuers, and whether or not they are being transparent in their dealings. While researching they looked at a sampling made up of 25 of the largest schools who work with issuers to offer students payment cards. During their research found several issues including:
• Four out of five colleges were not disclosing on their website that they had marketing contracts with issuers
• Over two-thirds were not giving access to agreements when they were asked to do so. upon request
The schools who did not provide the information are the ones that receiving the warnings.
Over 10 million college students are registered at schools that have deals with card issuers. These schools either help with or allow the promotion of payment cards. They often carry the school logo, and sometimes are even linked to their school ID.
When partnering up with issuers the schools may receive a share of the revenues, but research has shown that these cards often come along with higher fees than normal or unusual fees not found with other cards. In these cases, students would be better off with credit, debit and prepaid cards that they found on their own rather than going with school-branded and sponsored ones.
CFPB helping colleges do right by students
The agency has also created the Safe Student Account Toolkit, designed to assist these schools with choosing payment cards that have the students’ best interests at heart, and do not include hidden fees.