WASHINGTON—The CFPB has sent warning letters to 17 colleges directing them to improve disclosure of school-sponsored credit card agreements.
The Bureau said its investigation found that these schools failed to make marketing agreements available to the public, as required by law.
At the same time, the CFPB is also releasing its annual report on college credit card agreements, which highlights trends in the marketing partnerships between colleges and financial institutions and concerns about transparency with college-sponsored financial accounts. To promote increased protections for students in the expanding school-sponsored debit and prepaid market, the CFPB is releasing a “Safe Student Account Toolkit” to help colleges and universities avoid promoting financial accounts with surprise fees.
“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 released statement. “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.”
According to the CFPB, more than 10 million college students attend a school that has made a deal with a financial institution where the college helps with or allows the promotion of debit or prepaid cards. “These products are often endorsed with a college logo or linked to a student identification card,” said the CFPB. “Many more students also attend schools with agreements to co-sponsor credit card accounts. Colleges may get a share of the revenue generated from the cards, and these agreements can offer financial institutions access to a new group of consumers.”
Among the issues the CFPB said it identified:
- Four out of five colleges did not disclose their credit card marketing contracts on their website: Of the 25 colleges in the CFPB’s sample, 20 did not disclose their contracts on their website. Only seven of these 20 schools published information for the public on how to obtain the agreements—but only two of these schools ultimately provided the agreements upon request.
- More than two-thirds of the schools did not provide access to agreements upon request: Of the 20 colleges that did not post agreements on their website, only three provided agreements upon request as required by law. In addition, the Bureau found that most of the schools that published specific instructions for requesting agreements failed to provide access to agreements, even when borrowers followed these instructions.