US report: Colleges not disclosing card contracts


US report: Colleges obscuring contracts with credit card issuers
US report: Colleges obscuring contracts with credit card issuers

Many U.S. colleges are failing to publicly disclose their financial ties to credit card companies, in an apparent violation of consumer-protection laws, according to a federal consumer watchdog agency.

The Consumer Financial Protection Bureau says that in a sample of 25 colleges with the largest marketing agreements with credit card issuers, 17 did not appear to disclose those relationships by either placing the agreements on the school's website or making them available upon request. The Bureau said it sent warning letters to those colleges, which it declined to name.

The results of that sample suggest that lack of disclosure by colleges could be a widespread problem. There were 272 marketing agreements between colleges and card issuers at the end of 2014, the agency says. It receives information on the agreements from card companies, but colleges are still supposed to disclose the relationships to the public as required by the CARD Act of 2009.

The financial ties between card issuers and colleges have been under scrutiny for years. Critics say that students targeted with credit card marketing from their colleges might not know their colleges have a financial stake in pushing the cards and might fail to shop around for rival cards with lower fees and interest rates.

"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, in a statement accompanying the Bureau's annual report to Congress.

A spokeswoman for the leading trade group for college business offices, the National Association of College and University Business Officers, said nobody was available to discuss the issue.

A spokeswoman for Penn State University, whose alumni association is identified in the report as having the most accounts open as of 2014, said she believed her university is in compliance with the law because it makes its agreement available to anybody who requests it. The University did not believe it had received a letter from the CFPB as of Thursday.

The CFPB did not say what penalties colleges might face if they refuse to comply with disclosure requirements. In general, the agency has a wide range of enforcement options, including seeking civil penalties and court orders.

The agency's failed attempts to obtain the credit card agreements from colleges follows a similar effort in January 2015 by Consumers Union, a consumer advocacy group. In a letter posted on the group's website, it said staffers used information from previous CFPB reports to determine the 10 colleges with the most credit card accounts whose websites contain neither the agreement nor any guidance on how to obtain it.

Consumers Union then contacted those schools and found that "none of the campus switchboard operators we spoke with had any knowledge of what a college credit card agreement was, nor did they know which office might be able to respond to our request."

The 10 colleges were Yale University, Columbia University, Fordham University, University of Miami, University of Pittsburgh, Villanova University, University of Southern California, Northeastern University, Texas Christian University and Saint Louis University, Consumers Union said.

Largest issuer scales back
In addition, the CFPB found that the number of credit card agreements between colleges and card issuers is continuing to decline, as it has for the past few years. Since 2009, the number of agreements has fallen by nearly 70 percent to 272 agreements at the end of 2014, and the amount of money paid to colleges has dropped by about 60 percent, to $34 million in 2014.

Much of the decline stems from the decision by the dominant college card marketer, Bank of America and its subsidiary FIA Card Services, to reduce the number of marketing agreements by 45 percent each of the last two years. The CFPB said that 2014 was the first time that Bank of America accounted for fewer than half of the total number of agreements.

In a statement, Bank of America spokeswoman Betty Riess said: "Our co-brand business remains an important segment of our card business, including our partnerships with collegiate organizations. We have deliberately pared it back to focus on those partnerships that give us the greatest opportunity to deepen relationships."

While credit card agreements are on the decline, they appear to be eclipsed by the number of agreements with colleges to provide debit or prepaid cards. A 2014 report from the Government Accountability Office found that 852 colleges had agreements to provide debit or prepaid card services to students.

Those college cards can be convenient ways for students to receive financial aid money and pay for goods around campus, but they can also have unexpected fees, and students might not realize they have better financial options, the GAO found. It recommended that Congress consider ways to improve the transparency of those agreements.

The CFPB does not collect information on agreements for debit and prepaid cards.

The annual report on college credit card agreements also found:

  • The number of accounts included under the agreements reached a low of about 854,000, 58 percent fewer than in 2009. Because some of the agreements are with alumni associations, not all of those accounts are student accounts.
  • In 2014, 33 card issuers reported they had agreements with colleges or other higher education organizations. The largest new entrants were the First National Bank of Omaha, with 12 agreements and 1,092 new accounts, and the Harvard University Employees Credit Union, with one agreement and 1,787 new accounts.
  • The financial institution with the most college agreements in 2014 was FIA Card Services, a subsidiary of Bank of America, with 125 agreements and more than 666,000 accounts. FIA paid colleges a total of $26 million in 2014 -- about 75 percent of all the money paid to colleges under the marketing agreements.


Item 2009 2010 2011 2012 2013 2014 Net change, 2009-2014 Percent change, 2009-2014
Number of issuers 18 22 21 22 25 33 15 83%
Agreements in effect 1,045 1,005 796 616 447 369 -676 -65%
Total accounts open at year-end 2,041,511 1,709,054 1,503,664 1,209,608 948,158 853,725 -1,187,786 -58%
Payments by issuers $84,462,767 $73,459,987 $62,508,677 $50,407,472 $42,934,507 $34,105,376 $-50,357,390 -60%
New accounts opened 55,747 46,385 43,227 44,924 53,699 62,540 6,793 12%
Source: CFPB’s "College credit card agreements" report, December 2015

See related: Campus cards generate big rewards, but not for cardholders, U.S. proposes anti-steering rules on campus cards, CFPB urges colleges to compare deals for student accounts

Published: December 18, 2015

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