WASHINGTON Dec 17 The U.S. Consumer Financial
Protection Bureau on Tuesday called for banks to disclose their
agreements with universities to market debit cards and other
prepaid financial services 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
Through these deals, schools work with banks and other
financial firms to disburse school loans, scholarship or grant
money directly to students. Students often get debit or credit
cards that double as school identity cards.
The CFPB has found questionable practices arising from those
relationships, including university personnel receiving money
and gifts from lenders or owning stock in companies offering
services to students. Other schools accepted large amounts of
money or earned commissions per student who signs up.
The CFPB found that some students also were subjected to
aggressive marketing, and to extra fees such as overdraft
A 2009 law requires financial institutions to disclose
information about agreements with schools to provide credit
cards to students. They do not have to disclose information on
debit and other prepaid cards marketed on campus.
In its annual report to Congress on credit card agreements
between banking institutions and colleges, the CFPB said such
credit card agreements have fallen by 41 percent since 2009.
The amount of money given to schools by banks also fell from
about $84 million to $50 million in 2012, a 40 percent drop.
But even though the credit card agreements have declined,
two in five students now carry a debit card issued through their
campus, according to U.S. Public Interest Research Groups, a
collection of non-profit advocacy groups.
"As a result of strong public disclosure and consumer
protection rules, consumers are being made aware of the tricks
and traps that were layered into credit cards marketed on
campus," said Ethan Senack, U.S. PIRG's higher education
"But at the same time, financial institutions are using the
lack of disclosure requirements around debit and checking cards
to keep students in the dark," he said.
Several lawmakers in September sounded the alarm about such
agreements, saying they could expose students to exploitation
through "fee-laden" debit cards that raise the cost of their
education and push them further into debt.
The Consumer Financial Protection Bureau has taken a wide
interest in the burden of student debt, which it says now totals
Its latest announcement is part of several moves to curb
runaway student debt and protect consumers and students from
exploitation by financial institutions.