CFPB Report Finds Some Financial Institutions and Colleges May Be Steering Students to More Expensive Financial Products

On October 13, the Consumer Financial Protection Bureau (CFPB) released its 12th Annual Report to Congress on college credit card agreements. The report reviewed agreements and data covering the over 1.2 million student checking and credit card accounts that are governed by partnerships between institutions of higher education and financial services providers, and it highlighted market trends and possible risks. The key findings include that marketing efforts directed at students promote accounts that impose more costs than comparable accounts, and agreements between some financial institutions and colleges are not being disclosed in the manner required.

The provision of Regulation Z that implements Section 305 of the Credit Card Accountability, Responsibility, and Disclosure Act (CARD Act) requires credit card issuers to annually submit to the CFPB a copy of any college credit card agreements in effect at any time during the preceding calendar year between the issuer and an institution of higher education or affiliated organization. Credit card issuers are further required to submit: (1) the total number of credit card accounts covered by an agreement; (2) the total dollar amount of payments made by the issuer to the institution during the year and the method or formula used to determine such amounts; and (3) the number of new college credit card accounts covered by an agreement opened during the year. The CARD Act also requires the CFPB to submit an annual report to Congress and make the information submitted by credit card issuers publicly available.

The CFPB’s review included data on 11 deposit/prepaid account providers, including nonbank financial service providers, banks, and credit unions offering more than 650,000 student accounts in partnership with 462 institutions of higher education. Among other findings from the report, the CFPB highlighted:

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