The CFPB Is Taking a Closer Look at Financial Products Marketed to Students Enrolled in Institutions of Higher Education

On January 31, 2013, the Consumer Financial Protection Bureau (“CFPB”) published a notice in the Federal Register seeking information regarding the impact of financial products marketed to students enrolled in institutions of higher education (the “Notice”). Although the Credit Card Accountability, Responsibility and Disclosure Act of 2009 includes requirements that financial companies publicly disclose credit card agreements with colleges, universities and alumni associations, less is known about other financial products marketed to students, including debit cards to access student loan funds and bank accounts. At this time, we can only speculate about the outcome of the CFPB’s inquiry, but it is possible that it may lead to requirements, similar to those relating to credit cards, that financial companies publicly disclose these types of agreements with institutions of higher education.

The CFPB “seeks information on how partnerships between institutions of higher education…and financial institutions might be structured to promote positive financial decision-making among young consumers.”  

Emphasis on Campus-Affinity Relationships

The Notice makes clear that the CFPB is particularly interested in the impact of campus-affinity relationships on the student financial product market. Specifically, the CFPB seeks information on (1) products marketed through campus-affinity relationships and (2) other financial products marketed to students. 

According to the CFPB, campus affinity products “are generally financial products and services that carry an endorsement (either explicit or implicit) or mark of an institution of higher education,” including “products that display the name or mark of the institution, are bundled with student identification cards, and cards on which students receive disbursements of financial aid or other funds from the institutions of higher education.” Although the CFPB’s Request for information includes a lengthy list of questions, the following questions may be of particular interest to financial institutions:

• What types of fees are being charged in association with these products (e.g., overdraft and/or swipe fees)? What are the typical fee amounts? What are the terms and conditions of these products?
• What terms do institutions of higher education agree to when they affiliate with a financial institution to offer students financial products and services?
• What types of limitations, if any, do these affinity agreements include with respect to the fees that will be charged  to student users of the products?
• To what extent are financial products bundled with student ID cards? What percentage of students utilize these bundled financial products (e.g., a student ID card that doubles as a debit card, or closed-loop meal card accepted by local business)? Are there any charges or fees associated with the use of the bundled financial product? If yes, how are they assessed?
• To what extent are affinity financial products also bundled with financial education programs? What is the utilization of these education programs and how does it affect student behavior?
• What type of campus affinity products are being offered to students (e.g., financial aid disbursement accounts, student banking prepaid cards, and credit cards)?
• What are the features of these campus affinity products (e.g., online bill pay, mobile check deposit)?
• What information about students is provided by institutions of higher education to financial institutions (e.g., e-mail addresses, date of birth, program of study)?
• What types of incentives do affinity agreements offer institutions of higher education?
• How do financial institutions market these products to students and parents? Do financial institutions purchase enrollment information from third parties? Do financial institutions engage marketing consultants who specialize in the student consumer segment?
• Are the terms and conditions of student banking products (including, for example, amount and frequency of fees or penalties) clearly disclosed, disclosed in a timely manner, and easy to understand?

The deadline to submit comments is March 18, 2013.