In the United States today, the majority of Americans use credit and debit cards and students are no different. Often times students receive their first card when they enter a college or university. These cards are school sponsored credit cards. The schools are required by law to comply with the consumer protection laws when offering school sponsored credit cards. In December of 2015, the Federal Consumer Financial Protection Bureau (CFPB) sent warning letters notifying 17 higher education institutions that they have to improve disclosure of credit card agreements as required by law.
All colleges and universities are required to comply with the Credit Card Accountability Responsibility and Disclosure Act (CARD). Rule 15 U.S.C. § 1650(f)(1), known as the CARD Act, necessitates that all institutions of higher education must disclose publicly any contract or agreement made with a credit card issuer or a creditor whose intent is to market a credit card. 12 CFR § 1026.57(b); Comment 1026.57(b)-1 sets forth the guidelines for compliance:
- The relevant credit card agreement information may be published on the schools website.
- Information must be made available to students free of charge upon request using realistic procedures within a reasonable time frame.
In recent months, the CFPB has been conducting investigations into the availability of credit card agreements at numerous higher education facilities. The CFPB determined that many universities failed to make agreements available upon request and in a timely fashion. This is in direct violation of the law. In fact, the CFPB identified that most methods employed by the universities contacted failed to conform to the law. However, institutions that published the required information on the schools’ website are more likely to have complied with the federal law. This seems to be the most straightforward and least troublesome method of making the information available.
The CFPB along with the Department of Education (DOE) is urging institutions that promote higher education to review their methods for school sponsored financial agreements to ensure that they comply with the law. It is also highly encouraged to re-evaluate relationships with any vendors that they use for any type of financial products at the school. This includes prepaid credit cards and both bank and non-bank issued credit cards. This is necessary to ensure that the vendors are also operating under the specific laws and regulations that are set forth by the CARD Act, the Higher Education Opportunity Act (HEOA) which oversees government issued student loans to students who qualify, and also any other requirements by any other applicable federal agencies.
If your institution requires assistance to ensure that it is compliant with the credit card laws that have been set forth by the CARD Act, the HEOA or the Department of Education then it is important to contact an attorney who will be able to guide your organization and ensure that it is compliant with all the federal and state rules and regulations.
Alexis, Anthony. Letter to Prsident/Chancellor. 16 Dec. 2015. Http://files.consumerfinance.gov/f/201512_cfpb_card-act_warning-letter.pdf. Consumer Financial Protection Service, 16 Dec. 2015. Web. 18 Jan. 2016.
Bigart, Andrew E. “Pop Quiz: Regulatory Issues for Colleges Offering Financial Products to Students.” Www.venable.com/pop-quiz-regulatory-issues-for-colleges-offering-financial-products-to-students-01-04-2016/?utm_source=Mondaq&utm_medium=syndication&utm_campaign=View-Original. Venable LLP, Jan. 2016. Web. 18 Jan. 2016.