Many people have been waiting for the annual report on college credit card agreements and the CFPB announced last week that it’s ready. Not only that, but it’s also released its new database that allows consumers to read as many of those credit card agreements they wish. But what did the report say? We have the breakdown.
First, and the most striking fact we discovered was that most credit card companies make agreements with fraternities, sororities, alumni associations, or others with direct affiliations to these colleges.
That’s very important to know as it explains a lot as to why there was so much disagreement with CFPB moving forward with reining in the way credit cards were marketed on college campuses – and it’s also why so many disapproved of the CARD Act. There was a lot at stake.
So how did CFPB uncover all of this information? It’s all courtesy of President Obama’s CARD Act that was passed in 2009 and became effective in 2010. In it, it spells out various requirements, including the role of CFPB in Section 305:
Section 305…requires that we collect information on agreements between universities (or organizations affiliated with universities) and credit card issuers that provide for the issuance of credit cards to college students as well as alums and other affiliated people. Issuers must submit the terms of any agreements they have with universities as well as data on the number of accounts covered by the agreement that were open at year end, number of new accounts opened in the calendar year, and payments made by the issuer to the university as part of the agreement, among other information. Previously, the Federal Reserve collected this information, and on July 21, 2011, the Consumer Financial Protection Bureau assumed this responsibility.
The “meat and potatoes” of the report reveals that between 2009 and 2011, FIA Card Services, which is a subsidiary of Bank of America, submitted a total of 633 agreements, which encompasses a whopping 80 percent of all credit card agreements associated with colleges and college students in that time span; in fact, most of those agreements were made in 2011.
Other data includes the number of issuers who have credit card agreements with colleges. In 2009, there were 18 credit card companies that had contracts with colleges.
In 2010, that number was at 22 and by 2011, it had dropped by one to 21. Interestingly, in 2009, there were 1,045 contracts considered “in effect”. That number dropped to 1,005 in 2010 and by 2011, there were but 798 “in effect” agreements.
The dollar figures are startling. The payments by issuers break down to $84,462,767 in 2009, $73,459,987 in 2010 and by 2011, the numbers were at $62,428,278. That’s a neg change of more than $22,000,000 in just two years.
This speaks volumes, too, when it comes to how little oversight there was prior to these responsibilities being given to CFPB. Finally, one last statistic should tell the tale.
In 2009, there were 55,747 new credit card accounts opened on college campuses around the nation. That number dropped to around 46,400 in 2010 and by 2011, that number was at 43,000.
It’s expected an even more significant drop will be seen in the numbers for 2012 as the new law is in complete effect.
Remember the 80% coverage of Bank of America we mentioned earlier? Here’s what FIA paid out and to whom:
Penn State Alumni Assn. received $2.7 million in 2011 and in 2010, it received $4.3 million. Alumni Assn of University of Michigan received $1.7 million in 2011 and in 2010, it received $1.6 million.
Coming in third was the University of California, which received $1,508,000 in 2010 and in 2011, it received $1,502,000, which is surprising considering the drops some colleges saw.
University of Tennessee received from Chase Bank exactly $1,428,571 in both 2010 and in 2011. Rounding out the top five was California Alumni Association, which received from FIA $1.35 million in both 2010 and 2011.
In addition to monitoring college credit card agreements, CFPN also keeps a close eye on the market as a whole for other financial products geared towards college students. While it’s too early to determine any trends, it’s expected with more focus on credit card agreements and relationships, it’s likely financial products will shift elsewhere in the collegiate setting.
Want to see the report in its entirety? Visit consumerfinance.gov. Here you’ll learn the rest of the specifics as well as have the opportunity to see the entire report. It’s an extensive report, but one with a lot of information that consumers should know and understand.
So what are your thoughts on this latest CFPB effort? Were you surprised? Share your thoughts with us and let us know which side you fall on. Also, tomorrow we go to the polls and if Governor Romney is elected, it could very well mean the end of CFPB.
Do you think this is wise or do you think it’s part of Dodd Frank that should be rescinded? We really want to hear your thoughts on that possibility.
Similar Personal Finance News
- 3 Years In, Credit CARD Act Working – February 25, 2013
- Overwhelming Financial Truths: How They Affect Everything – May 27, 2013