Colleges are making fewer deals with banks to market credit cards on campus, and more to offer less-regulated debit and prepaid cards, a government watchdog said Monday.
The number of marketing agreements between schools and credit card providers has fallen by nearly 70 percent since Congress tightened the rules on disclosing those relationship in 2009, according to the Consumer Financial Protection Bureau.
Payments from credit card issuers to schools have fallen from $84 million in 2009 to $43 million in 2013. Those payments range from $25 from the Pennsylvania State Employees Credit Union to the Bloomsburg University of Pennsylvania to $1.1 million from Chase Bank to Yale University.
The 2009 Credit CARD Act requires colleges to disclose the terms and value of credit card agreements with schools and to public disclose those contracts to students.
Monday’s report indicates that the law has significantly cut into the student credit card business. It appears that banks, however, have shifted toward marketing deals involving debit and prepaid cards instead. The law does not require as high a level of transparency for those products.
“Today, financial institutions are cutting more deals with colleges and universities to market student banking products that require less disclosure,” said CFPB Director Richard Cordray said with the release of the 115-page report Monday. “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.”
There were only 336 agreements between schools and financial companies for marketing credit cards by the end of 2013, the CFPB found. But there were at least 852 schools that marketed debit or prepaid cards to students.
