Agreements with Credit Card Issuers Subject to Disclosure
February 15, 2010
Colleges and universities must make any credit card marketing contracts or other agreements with credit card issuers public by February 22, under final rules issued by the Federal Reserve Board implementing the Credit Card Accountability Responsibility and Disclosure Act of 2009. At the same time, card issuers are required to file their first annual report with the Federal Reserve on all college credit card agreements involving marketing to students.
New §226.57(b) of the Federal Reserve Board's Regulation Z, which implements the Truth-in-Lending Act, is short and to the point: "An institution of higher education shall publicly disclose any contract or other agreement made with a card issuer or creditor for the purpose of marketing a credit card." The official staff interpretation, provided as an appendix to the rule, advises that an institution could satisfy this requirement by posting any such agreements to its Web site or by making them available on request, as long as the procedures for making a request are reasonable and the agreement(s) are provided without charge in a timely manner. The preamble suggests that other avenues of disclosure could be acceptable as well. Agreements must be disclosed in their entirety without regard to any confidentiality clauses.
The rest of §226.57, Special Rules for Marketing Open-end Credit to College Students, is addressed to card issuers. Card issuers may not offer college students any tangible inducement for opening a credit card account on or near a campus or at an event sponsored by or related to an institution of higher education. Card issuers must also report annually to the board on any "college credit card agreement" in effect at any time during the previous calendar year. A "college credit card agreement" is defined as "any business, marketing or promotional agreement between a card issuer and an institution of higher education or an affiliated organization in connection with which college student credit cards are issued to college students currently enrolled at that institution." In addition to identifying information, the report to the board must include:
- Copies of the agreements
- Copies of any memorandums of understanding that are directly or indirectly related to the agreement
- Total dollar amount of any payments made to an institution of higher education
- Total number of credit card accounts opened pursuant to the agreement
- Total number of credit card accounts opened pursuant to the agreement that were open at the end of the year
The first annual report from card issuers is due February 22, covering calendar year 2009. Future reports will be due on the first business day on or after March 31.
Institutions should note that agreements covered by these disclosure requirements are different for card issuers and colleges and universities. Colleges and universities must disclose any agreement pertaining to marketing of credit cards, regardless of whether such marketing is targeted to students. Institutions do not need to disclose agreements between a card issuer and any organizations affiliated with the institution (providing they are separate legal entities). There is no parallel disclosure requirement for affiliated organizations.
Some institutions have long-standing agreements with card issuers that have been amended, but not rewritten, over the years and could be potentially confusing if disclosed as a series of changes. A Federal Reserve official has indicated to NACUBO that there is enough leeway in the regulation for the institution to prepare and disclose a "compiled" version of the agreement which incorporates all changes currently in effect.
Relevant Provisions Excerpted
While the regulations have been officially released by the Federal Reserve Board, they have not yet been published in the Federal Register. Because many other issues concerning credit cards are also addressed in the notice, it is very long (over 1,000 pages in the current version). As we did for the proposed rules, NACUBO has prepared an excerpt that focuses only on the rules under §226.57, along with the relevant discussion in the preamble and official staff interpretation.
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