Credit Card Accountability Creates Shift To Debit And Prepaid Cards

In 2009, Congress passed the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act, which requires issuers to disclose to the CFPB the terms and conditions of any college credit card agreement, the number of new credit card accounts, and the compensation paid by issuers to institutions of higher education in the previous year. In order for students and the public to identify marketing agreements currently in effect, Congress further required that colleges and universities also publicly disclose these agreements. The CFPB is required to submit an annual report to Congress about these agreements, and to make the report publicly available.

The Consumer Financial Protection Bureau (CFPB) released its annual report on college credit card agreements, which shows a nearly 70 percent decline in the number of agreements since Congress passed new disclosure requirements in 2009. These findings highlight the trend of shifting from credit cards toward other products such as debit and prepaid cards. The report also found that most colleges with credit card agreements do not make those agreements readily accessible to students and families. 
BRIEF HISTORY

A lack of transparency in the student loan and credit card markets led Congress to enact reforms to help the public better understand the marketing partnerships between colleges and lenders. In 2008, Congress passed a law requiring schools to disclose preferred lender arrangements with student loan providers and establish a code of conduct for school officials.


REPORT

The CFPB found that:

• College credit card agreements continue to decline: In recent years, there has been a steady decrease in both the number of college credit card agreements and open accounts. In 2009, some 1,045 agreements were in effect. In 2013, 336 agreements were in effect; around a 70 percent drop.
  

• College debit and prepaid card agreements are now more common than credit card agreements: According to a report from the Government Accountability Office, there were at least 852 schools that had agreements with companies to market debit or prepaid cards to students in 2013. Unlike credit cards, these products do not have specific requirements in federal consumer financial laws to disclose their marketing partnerships.
  

• College credit card agreements are not readily accessible: The CFPB reviewed 35 college and university websites to determine if they made their credit card agreements easy for students and families to find and access. The Bureau found that 80 percent of these institutions—28 of 35—do not put their agreements, or information about how to request them, on their websites.
  

The CFPB’s public database on college credit card agreements is available at: http://www.consumerfinance.gov/credit-cards/college-agreements/