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Business and Policy Areas
Business and Policy Areas

CFPB Report Criticizes Campus Banking Agreements

December 22, 2016

A report released by the Consumer Financial Protection Bureau (CFPB) in mid-December raises concerns about financial products marketed to students by colleges and universities. The release, originally intended to comply with a mandate in the CARD Act for an annual report on student credit card arrangements, criticizes institutions' efforts to negotiate account terms that are in students' best financial interests.

While the report is largely unflattering, it prefaces that the "observations do not necessarily suggest the prevalence of the issues described as they relate to the entire market for college-sponsored accounts..." Additionally, when discussing occurrences of "consumers [spending] hundreds of dollars a year in overdraft fees" and schools marketing a "worse deal for students than what they can find shopping around on their own[,]" it cites data from before changes to ED's cash management rules governing such agreements went into effect. The report does note examples of schools that negotiated exemplary agreements for student accounts.

In reviewing the Department of Education's publicly available database of agreements between higher education institutions and financial partners, the report admonishes agreements where schools fail to require with specificity advantageous features for student account holders such as restrictions on monthly maintenance fees and overdraft protections. The CFPB also charges schools with missing opportunities to require regular updates to the institution on fees paid by students and providing a mechanism for handling student complaints.

The CFPB also raises concerns that some institutions have not yet disclosed all required agreements to ED's database in cases where they have reason to believe such agreements exist. The database was mandated under revisions to ED's cash management rules that were issued in late 2015. Last year, NACUBO published a compliance checklist to assist institutions in complying with ED's revised cash management regulations. Institutions with Tier 1 or Tier 2 contracts with servicers or financial institutions were required to both post them on their websites and provide the URL to ED by September 1, 2016.

The report also discusses agreements between colleges and universities and banks relating to affinity credit card accounts, noting that such agreements are in a steady decline with a corresponding decrease of approximately 60 percent fewer accounts open at the end of 2015 compared with 2009. This includes agreements not only with institutions but also those with alumni associations, institutional foundations, and social groups (e.g., sororities and fraternities). Despite the downward trend, the CFPB released a compliance bulletin in conjunction with the report, reminding institutions of their obligations concerning college credit card agreements. 

NACUBO offers best practices guidelines for student banking relationships, which recommend that schools negotiate low- or no-fee options and convenient services for students. The guidelines also recommend that institutions oversee marketing efforts to ensure students are presented with a fair explanation of services and not with misleading, biased, or aggressive marketing.


Megan Schneider
Assistant Director, Federal Affairs

Anne Gross
Vice President, Regulatory Affairs