Colleges May Be Violating CARD Act By Not Providing Copies Of Credit Card Agreements

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Although the number of agreements between credit card issuers and higher education institutions are on the decline, many of the schools that do have such agreements may be in violation of the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act by not making those contracts publicly and readily available to consumers, according to a new investigation by a consumer group finds.

Consumers Union, the advocacy branch of Consumer Reports and colleagues of Consumerist, sent a letter [PDF] to the Consumer Financial Protection Bureau today raising concerns about the availability and continued lack of transparency regarding college and credit card issuer agreements.

The letter highlights a CU investigation that found several potential CARD Act violations by colleges and universities across the U.S. that have the largest active volume of student accounts.

The CARD Act, which was passed in 2009, provides several protections for consumers, one of which requires colleges that have credit card marketing agreements with financial institutions to make such agreements available to the public online or upon request.

Under such agreements credit card companies can issue debit or credit cards to students, while colleges and universities receive millions of dollars a year in royalties and bonuses by allowing said companies to use their logos and approach their students.

Following the CFPB’s annual report [PDF] on college credit card agreements that found nearly 80% colleges do not post their agreements online, CU conducted the informal investigation to see if members of the public could easily obtain copies of the agreements by calling the school’s main campuses and requesting the information – as required by the CARD Act.

“We found it can be challenging, if not impossible, for a member of the public to get information about college credit card agreements,” Suzanne Martindale, staff attorney for CU, says in a statement. “It just adds to the confusion and secrecy surrounding these partnerships.”

Colleges selected for the investigation were chosen because they have the largest active account volume and do not post agreements or information on how to obtain copies of agreements online.

Over a three-day period CU placed calls to the main switchboards at Yale University, Columbia University, Fordham University, University of Miami, University of Pittsburgh, Villanova University, University of Southern California, Northeastern University, Texas Christian University, and Saint Louis University.

A majority of the schools have agreements with Bank of America, while USC has an additional agreement with USC Credit Union and Yale partners with Chase.

CU reports that none of the 10 schools provided information or copies of their credit card agreements.

Additionally, none of the campus switchboard operators who spoke to CU had any knowledge of what a college credit card agreement was and could not provide definitive information on which office might be able to respond to the requests.

According to the letter, office staff at two of the 10 campuses said they did not believe the school even had a credit card agreement with a particular financial institution.

And operators at six of the 10 campuses transferred or directed CU staff to call two or more departments, none of which were able to provide information on the agreements.

Some of the offices the advocates were instructed to contact appear to have little to do with student finances including Dining Services, Parking and Card Services, Student Activities And Human Resources.

Other departments including Student Affairs, Student Financial Services, Financial Aid, and the Registrar, which could reasonably have knowledge of the agreements, were also unable to provide information to CU.

The advocates tell the CFPB that the investigation’s findings provide an example of the roadblocks faced by students and members of the public who want to exercise their right to obtain information about agreements between their schools and financial institutions.

“If your school makes a deal with a bank for a card like this, you have a right to know the details,” Martindale, the CU attorney, says.

In light of the investigation’s findings, CU urged the CFPB to continue to implement the CARD Act and actively promote compliance at all colleges and universities that hold agreements with credit card companies.

“Schools clearly need to step up and make sure they follow the law,” Pamela Banks, senior policy counsel for CU, says in a statement.

Consumers Union to CFPB: Some colleges may be violating credit-card law [Consumers Union]

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