College Credit Card Accounts Have Declined Steadily Since CARD Act
Each year, the CARD Act requires the Consumer Federal Protection Bureau to issue a report on the agreements between credit card issuers and institutions of higher learning and their affiliated organizations. The goal is to create more transparency in the world of college-affiliated credit cards and agreements that issuers have with universities and their alumni associations.
Title III of the CARD Act made the following changes in the world of student credit cards:
- Financial institutions must disclose any agreements they have with colleges and universities to market products to students.
- Financial institutions and colleges may not use gifts to entice students to apply for cards.
- Applicants under the age of 21 must have a written application detailing the student’s ability to pay for a credit card, or have a cosigner over the age of 21.
- Credit card issuers must submit annual reports to the CFPB about the terms and conditions of their college credit cards.
The December 2013 report released last week by the CFPB reflects the data from 2012, and it shows some dramatic changes since the CARD Act was passed in 2009.
The number of agreements in effect, the total number of open college-affiliated credit card accounts, and the total payments by issuers have declined every year since 2009. In fact, each of these benchmarks has dropped 40% during that period.
- The number of agreements in effect has declined from 1,045 in 2009 to 617 in 2012.
- The number of open accounts has decreased from 2,041,511 in 2009 to 1,222,718 in 2012.
- The total payments by issuers has dropped from $84.4 million in 2009 to $50.4 million in 2012.
- A subsidiary of Bank of America, FIA Card Services, still holds nearly two-thirds of these agreements (412 of 617) with institutions of higher learning. Capital One has 55 agreements.
“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.”