The CFPB wants financial institutions to post on their websites their marketing agreements with colleges and universities for financial products other than credit cards, such as deposit accounts, prepaid cards and financial aid disbursement accounts. Pursuant to the CARD Act, card issuers must submit their campus credit card agreements annually to the CFPB together with their related marketing agreements and certain information, including the amount of compensation they paid to schools. However, there is no federal law requirement for financial institutions to disclose their marketing agreements or similar information for other financial products. The call for voluntary disclosure of such agreements was made yesterday in a blog post by Rohit Chopra, CFPB Assistant Director and Student Loan Ombudsman.
The CFPB’s “request” is an outgrowth of the findings on campus financial products it released in October 2013. The CFPB found that campus financial product marketing arrangements have shifted away from credit cards towards student checking and debit or prepaid cards. (The CFPB has suggested this shift is the result of CARD Act and other federal law restrictions on credit card affinity arrangements and student loan referrals.) Most notably, the CFPB found that arrangements between financial institutions and schools to offer student banking products “are not well-understood.”
Both the CFPB’s press release about its “call for transparency” and Mr. Chopra’s blog post indicated that a financial institution’s failure to disclose its campus marketing agreements could make it a target for examination, a threat which now seems to be almost a boilerplate provision for any CFPB release. After noting that it prioritizes examinations based on “risks” posed to consumers, the CFPB stated in its press release that “[w]hen institutions do not make these college financial product arrangements transparent to students and their families, they may increase such risks.” This statement is somewhat difficult to understand, given that the CFPB fails to explain why the “risks” are so great that, regardless of the pricing for the financial products, they would, all by themselves, lead the CFPB to single out an institution for examination.
Similarly, in his blog post, Mr. Chopra stated that “not publicly disclosing [campus marketing] agreements raises potential [but again, unspecified] consumer protection risks.” He also indicated that the CFPB plans to contact financial institutions in 2014 “to find out more about their commitment to transparency” and ask “about whether existing agreements are made available to students and families in a clear and conspicuous place on their company’s website.” All of this might have been more meaningful had the CFPB indicated the extent to which the public now accesses its database of college credit card agreements, or even the extent to which the public has viewed its prior Reports, but that information was conspicuously absent from the 2013 College Credit Card Agreements Annual Report to Congress, released concurrently with the CFPB’s press release and Mr. Chopra’s blog post.
The Annual Report did disclose, though, that: (1) the number of college card agreements in effect decreased by 41% between 2009 and 2012; (2) the total amount of payments schools received from card issuers in 2012 was about 40% less than the total amount they received in 2009; and (3) the number of new college accounts opened in 2012 was 18% less than the number of accounts opened in 2009. The CARD Act requires the CFPB to issue this annual report to Congress based on the information it receives from card issuers about their campus credit cards.