Expanding transparency around colleges is always a concern. Families and students, who are often viewed as “consumers” of higher education, are rightfully due the disclosure of a bevy of relevant information about institutions they compensate in exchange for education. In addition to the many existing laws governing required disclosures by colleges, there’s been, in recent years, a push for transparency in possible costs (the net price calculator), a push for transparency in campus safety (Clery Act and campus safety statistics), and a push for transparency in defaults of loans (cohort default rates). Such transparency is required of private and public schools, under the assumption that certain types of transparency are universally needed for students and families.
On Tuesday, there was a call for greater collegiate transparency in a new realm: campus debit cards. In a release, the Consumer Financial Protection Bureau (CFPB) called for financial institutions that have campus debit cards to disclose the nature of their relationships with institutions of higher education. Such deals typically allow financial institutions to market campus-branded debit cards to students.
The existence of campus-branded debit cards is predicated on a mutually beneficial relationship: the financial institution gets access to a pool of new customers while the college gets revenue from the agreement. Over recent years, such financial products and the contractual relationship between the financial institutions and the colleges that help brand them have come under increased scrutiny. Some of this scrutiny was codified into the CARD act, which required certain disclosures and modified some of the existing marketing rules for credit cards on college campuses. As the number of college credit cards have fallen, however, campus debit cards have become a greater focus for regulators. The CFPB’s main worry appears to be that the nondisclosure of the terms of a fee-kickback structure to the college has the potential to increase risk to consumers.
This worry is likely exacerbated by the fact that many students can receive federal financial aid on campus debit cards. Federal financial aid has long been tied to specific transparency requirements by the federal government. This Department of Education document is distributed to schools as a method for outlining required and suggested disclosures, many of which the acceptance of financial aid mandates a school to complete. (You may have seen this document on our website before–College Parents of America used it for research as part of its argument in asking the federal government for greater data collection, greater transparency in the disclosure of withdrawal refund information, and for uniform and conspicuous publication of College Navigator data on college websites). According to Inside Higher Ed, “In addition to the CFPB’s focus on campus debit card agreements, the Education Department has also said it plans to create new regulations about how federal student aid can be disbursed on campus debit cards. A negotiated-rulemaking panel will begin meeting in February to hammer out those regulations.”
Official requests for terms of contracts betwen financial institutions and colleges are likely to come out in the first two months of 2014.