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Financial Services Law Insights and Observations


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  • CFPB Releases Annual Report On College Cards, Urges Disclosure Of Campus Marketing Agreements

    Consumer Finance

    On December 17, the CFPB released its annual report to Congress on college credit card agreements, prepared pursuant to the CARD Act. The report follows an inquiry launched earlier this year into financial products marketed to students. The study revealed that since 2009, the number of college card agreements in effect has decreased by 41 percent, the compensation paid to colleges and universities has decreased by 40 percent, and the number of new accounts opened by students has decreased by 18 percent.

    The Bureau’s press release urges financial institutions to voluntarily disclose to the public any agreements with colleges and universities to market debt, prepaid, and other products to students and warns that “[t]he CFPB prioritizes its supervisory examinations based on the risks posed to consumers” and “[failing to make] college financial product arrangements transparent to students and their families . . .  increase[s] such risks.”

    Credit Cards CFPB Student Lending Affinity Products CARD Act Deposit Products

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  • CFPB Event Focuses on Student Banking

    Consumer Finance

    On September 30, the CFPB (or the Bureau) hosted a “Banking on Campus” forum, an event it described as a continuation of its February 2013 request for information about financial products and services marketed to college students. The event featured remarks from government officials, including the CFPB and the U.S. Department of Education, as well as presentations from students, school officials, financial institution representatives, and consumer advocacy groups. Generally, the discussion centered on the potential financial impact of exclusive marketing arrangements between schools and financial service providers on students, particularly with regard to financial aid disbursement products.

    Director Cordray provided opening remarks in which he stated the Bureau’s concern that colleges and universities may be encouraging or even requiring students to use financial products that do not offer the best deals, while the schools are “secretly making money” from marketing agreements with financial service providers.

    CFPB Student Loan Ombudsman, Rohit Chopra followed with a presentation that summarized the findings from the Bureau’s request for information, which may indicate the direction the CFPB will take in further scrutinizing student banking products and services.  According to Mr. Chopra, the CFPB received 162 responses to its request for information and reviewed publicly available information. The Bureau’s initial observations include, among others, that: (i) financial product marketing partnerships have shifted to student checking, debit and prepaid card products (particularly student ID card accounts and financial aid disbursement cards/accounts); (ii) college affinity products generally do not appear to have more attractive features compared to other student checking products; and (iii) marketing arrangements between financial institutions and institutions of higher education for many student banking products are not well understood.

    Mr. Chopra identified the following as questions requiring further exploration:

    • How can colleges and universities better use their bargaining power to negotiate better product terms and conditions?
    • How can students be better equipped to shop for student checking, debit, and prepaid card products?
    • What obstacles do colleges and universities face when seeking to adopt established professional best practices on disclosure of debit card arrangements?
    • Have colleges and universities established codes of conduct for employees who negotiate marketing agreements for checking, debit, and prepaid card products?
    • How does the delivery model for federal student aid impact this market, and what can be learned from other federal benefit delivery models, such as Treasury’s Direct Express program?

    Several of the student and consumer advocacy group panelists claimed that under exclusive marketing arrangements between financial service providers and schools, students are steered into unneeded and non-competitive products that result in unnecessary fees. Those participants called for more choice for students and stressed that schools should promote direct deposit of disbursement funds over the use of cards to allow students to choose their own financial service provider. At least one consumer group panelist called for revenue sharing agreements between schools and providers to be prohibited. Other participants referenced U.S. PIRG’s May 2012 report, which contains campus card best practices and recommendations for the CFPB to enforce the Electronic Fund Transfer Act, including by enforcing the rule that prohibits any person from being required to have an account at a particular institution as a condition of receipt of a government benefit

    CFPB Student Lending Debit Cards Affinity Products

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  • CFPB Launches Inquiry into Financial Products Marketed through Higher Learning Institutions

    Consumer Finance

    On January 31, the CFPB issued a notice and request for comment about how current and future arrangements between institutions of higher education and financial institutions could be structured “to promote positive financial decision-making among young consumers.” The inquiry also is designed to help the CFPB “develop a clearer picture of the financial products and services that are being offered to college students, as well as consumers’ experiences using those products and services.” Specifically, with regard to campus affinity relationships, the CFPB wants to know, among other things, (i) what types of campus affinity products are being offered to students, what features do they have, how are they being marketed, and what are their terms and conditions, including fees, (ii) what information about students is being provided to the education institution, (iii) the nature and volume of student complaints, (iv) what benefits are education institutions realizing through affinity relationships, and (v) the extent to which these products are bundled with student identification cards. The CFPB also seeks similar information about other financial products marketed to students. The CFPB is seeking comments from various stakeholders, including students, institutions of higher education, and financial institutions by March 18, 2013.

    CFPB Affinity Products

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