Campus card agreements continue shift from credit to debit
CFPB: College cards change their stripes with nonpublic deals
By Fred O. Williams | Published: December 15, 2014
Banks and colleges continue to drop marketing deals that give credit cards a special entree on campus, but are open to public scrutiny, the U.S. Consumer Financial Protection Bureau said in a report Monday.
Instead, agreements that help banks market debit and prepaid cards to students -- with less scrutiny -- are the big game on campus, the agency said.
"Today, financial institutions are cutting more deals with colleges and universities to market student banking products that require less disclosure," CFPB Director Richard Cordray said in a statement announcing the bureau's fourth annual report on campus credit card marketing.
The shift has come since the Credit CARD Act required that credit card companies disclose their marketing deals with campuses, including the lucrative payments they made to schools for special access to campuses.
Credit card deals have plunged from 1,045 in 2009, the year before the act took effect, to 336 at the end of 2013, the report said. Annual payments to schools dropped from $84 million to $43 million over the same period.
Credit card deals are now a fraction of the campus marketing agreements for debit and prepaid cards, which are in place on at least 852 schools, according to U.S. Government Accountability Office figures quoted in the CFPB report.
How much are schools making to help banks put debit and prepaid cards in students' wallets? That's impossible to say, because few schools or banks make the agreements public, despite the urging of the CFPB and the National Association of College and University Business Officers, (NACUBO), a professional group for college administrators.
"Schools and financial institutions should be upfront 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," Cordray said in the statement. Only seven schools of 35 surveyed by the CFPB disclosed the terms of their debit card marketing deals with banks, or gave instructions on how to obtain copies of the agreements.
Schools and financial institutions should be upfront 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.
|-- Richard Cordray
Campus debit card deals have prompted the same questions that moved legislators to require disclosure of credit card marketing. Regulators including the Education Department and the GAO have raised questions about the conflict of interest that the deals create for colleges, and the impact those conflicts are having on students' costs, the CFPB report noted. Students sometimes pay higher fees for the school-approved debit cards, the report said, than for other debit cards available on the market but not being pushed by their colleges.
The practices of Higher One, the leading issuer of campus debit cards, drew a penalty in 2012 from the Federal Deposit Insurance Corp. for practices the agency called "unfair and deceptive," the CFPB report noted. The FDIC found that Higher One and its banking partner Bancorp Bank charged multiple insufficient funds fees from a single transaction.
The CFPB's annual "College credit card agreements" report to Congress covering 2013 also found:
- For the first time, more than half of credit card agreements were between a card issuer and an alumni association, rather than with the university itself. New accounts opened under card marketing agreements are increasingly likely to be with alumni, not current students.
- Bank of America remained by far the largest holder of campus credit card agreements, with 225 agreements covering 764,000 open accounts. The bank operates its credit card business through unit FIA Card Services N.A. Capital One, the No. 2 college marketer, had 56 agreements with 8,077 accounts.
- The drop in card agreements decelerated in 2013, with 169 agreements closing compared to 214 the year before. However some issuers are moving against the trend -- notably Discover, which entered the college credit card market in 2013 with 11 agreements, all with alumni associations.
|25 MOST-LUCRATIVE COLLEGE-RELATED CREDIT CARD DEALS|
|Institution or organization||Credit card issuer||Total open accounts, 12/31/2013||Payments by issuer in 2013||New accounts opened in 2013|
|1. Penn State Alumni Association||Bank of America||57,240||$2,807,743||1,956|
|2. The Ex Students Association of The University of Texas||Bank of America||25,080||$2,256,235||496|
|3. Alumni Association of the University of Michigan||Bank of America||29,393||$1,900,000||1,414|
|4. California Alumni Association||Bank of America||16,910||$1,358,992||1,245|
|5. Association of Former Students of Texas AM University||Bank of America||27,371||$1,259,690||551|
|6. Stanford Alumni Association||Bank of America||13,428||$1,250,000||414|
|7. General Alumni Association of University of North Carolina at Chapel Hill||Bank of America||15,881||$1,250,000||822|
|8. University of Arizona Alumni Association||Bank of America||10,125||$1,217,728||401|
|9. Golden Key International Honour Society||Bank of America||27,953||$1,147,679||724|
|10. Yale University||Chase Bank||7,729||$1,140,000||8|
|11. Board of Regents of the University of Oklahoma||Bank of America||1,171||$1,000,000||1|
|12. Purdue Alumni Association||Purdue Federal Credit Union||24,504||$1,000,000||3,269|
|13. National Alumni Association of the University of Alabama||Bank of America||11,624||$960,000||324|
|14. Wisconsin Alumni Association||Bank of America||17,266||$957,396||559|
|15. The Kansas University Alumni Association||INTRUST Bank, N.A.||12,130||$876,968||304|
|16. Kansas State University Alumni Association||INTRUST Bank, N.A.||12,891||$839,705||282|
|17. The University of Georgia Foundation||Bank of America||17,310||$682,920||568|
|18. Oklahoma State University Alumni Association||Chase Bank||4,900||$600,000||1|
|19. University of California Irvine Alumni Association||Bank of America||3,650||$553,858||2|
|20. Trustees of the University of Pennsylvania||Bank of America||9,129||$525,000||426|
|21. Iowa State University Alumni Association||Bank of America||12,037||$521,060||422|
|22. University of Minnesota Alumni Association||Bank of America||1,102||$477,550||446|
|23. University of Illinois Alumni Association||University of Illinois Employees Credit Union||9,658||$475,000||2,111|
|24. UCLA Alumni Association||Bank of America||23,719||$451,336||2,352|
|25. Auburn Spirit Foundation||Bank of America||12,655||$412,825||414|
|Source: Consumer Financial Protection Bureau annual report on college credit card deals, covering active 2013 deals. Bank of America cards provided through its subsidiary FIA Card Services, N.A.|
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