Thursday, January 16, 2014
CFPB seeks voluntary campus card agreement disclosures
In December 2013, the Consumer Financial Protection Bureau called on financial institutions (FIs) to publicly disclose the debit and prepaid card program agreements they have with colleges and universities. The CFPB expressed concern that such agreements are designed to manipulate college students into opting into such programs.
"Students and their families should know if their school, whether well-intentioned or not, is being compensated to encourage students to use a specific account or card product," said CFPB Director Richard Cordray. "When financial institutions secretly give kickbacks to schools, they are engaging in risky practices."
By federal law, FIs must disclose credit card agreements with higher education institutions, but not debit and prepaid card agreements. The CFPB noted that the number of credit card agreements in the higher education sector have decreased in recent years as the market has shifted to student checking, debit and prepaid card products. The bureau believes that the number of such partnerships now outnumber college credit card agreements in the marketplace.
The CFPB warned that failure to disclose program details raises potential consumer protection risks.
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