The annual Consumer Financial Protection Bureau (CFPB) report on college credit card agreements showed a 70% drop in agreements since 2009, when Congress passed new requirements for credit card agreement disclosures on college campuses.
However, CFPB director Richard Corday does not see this as necessarily positive news. That’s because instead of credit cards, more colleges and universities are partnering with financial institutions to offer debit and prepaid cards. The required disclosures and protections on these products are not as stringent as with credit cards, making it easier for banks to get their cards in students’ hands.
“Financial institutions are cutting more deals with colleges and universities to market student banking products that require less disclosure,” said Cordray. He went on to explain thatpeople aren’t always aware schools are benefitting from an agreement to push certain card products. “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.”
Ramifications of the CARD Act
Reforms enacted under the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act in 2009 forced credit card issuers to disclose the terms and conditions of their agreements with colleges and universities, along with the number of new credit card accounts that were opened on campuses and how much they were payinghigher education institutions to market certain credit products. Congress also required the schools to disclose this information as well. Schools and banks give this information to the CFPB, which then compiles a report and submits it to Congress once a year. This report is available to the public here.
Debit and prepaid cards rule college campuses
As credit cards agreements on college campuses decline, debit and prepaid cards are filling the void. The CFPB found that at least 852 schools had partnership agreements with banks to market their debit or prepaid products to students in 2013. The details of these partnerships are not known, since neither financial institutions nor colleges are required to disclose them.
Meanwhile, credit card agreements have declined dramatically since 2009, when approximately 1,045 agreements were in effect on campuses across the nation. By the close of 2013, only 336 college/credit card partnerships remained in effect. The financial impact of that drop is substantial: in 2009, credit card issuers paid more than $84 million to schools in royalties and bonuses for these agreements. In 2013, only $34 million changed hands for campus credit card agreement-related royalties and bonuses.