College-Lender Credit Card Deals Plummet as Regulation Intensifies

College-Lender Credit Card Deals Plummet as Regulation IntensifiesThe U.S. Consumer Financial Protection Bureau is reporting a decline of 23 percent in college-lender credit card agreements from 2011 to 2012.
The CFPB’s just-released annual report on college credit card agreements also found that fewer new college accounts are being opened, while the number of college card issuers has increased from 18 to 23 in recent years.
In 2009, there were 55,747 new accounts opened. In 2012, that number decreased by 18 percent to 45,519.
A lack of transparency in the student loan and credit card markets forced lawmakers to enact reforms five years ago.
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 financial aid officials.
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.
Currently, institutions only make these disclosures about college credit cards.
The CFPB is now urging financial institutions to disclose publicly their agreements with colleges and universities to market debit, prepaid, and other products to students.
“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.”
Here are the highlights of the CFPB’s annual report:
Fewer college card agreements are in effect: The number of college card agreements in effect has declined by 41 percent between 2009 and 2012. In 2009, 1,045 college card agreements were in effect for over two million accounts, compared to only 617 agreements for just over a million accounts in 2012.
Institutions of higher education are paid less by credit card issuers: In 2009, colleges and universities were paid $84,462,767 by credit card issuers. In 2012, that figure was $50,396,103—a decline of about 40 percent.
Fewer new college accounts are being opened: While the number of college card issuers has increased from 18 to 23 in recent years, fewer new accounts are being opened. In 2009, there were 55,747 new accounts opened. In 2012, that number decreased by 18 percent to 45,519.

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