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Alerting colleges about secret banking contracts

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If you’re a student preparing to head back to campus, you may encounter offers from banks and other companies that promote debit cards, prepaid cards, bank accounts, and other products branded with your school’s name or logo. When your school makes a deal with a company to market a financial product, it’s important for you to have basic information about this agreement and to understand what this means for your options. Last year, we launched an inquiry into financial products marketed to college and university students to determine whether the market is working for students and families.

We called on financial institutions to publicly disclose agreements with institutions of higher education to market financial products to students. Information about these arrangements is already required to be disclosed when marketing credit cards and private student loans to students—these requirements were put in place after companies were found to have paid schools and school officials in order to steer students into these products.

Making these agreements available for all financial products shows schools’ and companies’ commitment to transparency, helping students and their families understand basic information about these products before you sign up.

We decided to take a look at the financial institution partners of a group of some of the largest universities in America – members of the Big Ten conference – to see if they’ve disclosed agreements on their websites. Together, these schools enroll more than a half a million students.

Of the 14 member schools (yes, there are 14 schools in the Big Ten), it appears that at least 11 have established banking partners to market financial products to students. Of those 11, we were able to easily find only four contracts on the partner websites, but three of those four contracts did not contain important information, such as how much they pay schools to gain access to students in order to market and sell them financial products and services.

University Financial partner Contract available on partner website?
University of Illinois, Urbana-Champaign TCF Bank Partially
Indiana University Unknown -
University of Iowa Hills Bank & Trust Co. Yes
University of Maryland Capital One No
University of Michigan TCF Bank Partially
Michigan State University MSU Credit Union No
University of Minnesota TCF Bank Partially
University of Nebraska Wells Fargo Bank No
Northwestern University US Bank No
Ohio State University Huntington Bank No
Penn State University PNC Bank No
Purdue University Unknown -
Rutgers University Unknown -
University of Wisconsin UW Credit Union No

We’re not the only ones to take note. Recently, the Government Accountability Office also noted that “increased transparency for college card agreements could help ensure that the terms are fair and reasonable for students and the agreements are free from conflicts of interest.”

We’re also sending alerts (here’s an example) to schools to make sure they know that their bank partner has not yet committed to transparency when it comes to student financial products.

If you’re starting school this fall, be sure to check out our guide on student banking. You can learn about various options when looking for a bank account. And remember, you can’t be required to use the bank that pays your school to market to you.

Have you been able to find your school’s contract with its bank partner? Tell us your story and tag it as “student banking.”

Rohit Chopra is the CFPB’s Student Loan Ombudsman. To learn more about the CFPB’s work for students and young Americans, visit consumerfinance.gov/students.

Updated August 7, 2014: An earlier version of this post noted that Purdue University and Indiana University had established agreements in place with partner financial institutions, but these agreements are related to real estate. We’ve updated this post accordingly.

  • Greg

    I’m happy that no one actually reads this nonsense since that would mean a government agency is likely responsible for libelous behavior. To place private organizations on your lists of “inferred” bad people with “secret” contracts you are doing harm to their business and you have no clue what you’re talking about. You might want to actually do a little research before you start “naming names” and placing blame for absolutely nothing.
    The CFPB is nothing more than a public extortion organization for the government at this point. Rohit, you should be out of a job. I assume that is what you would “suggest” to a private business employee who did such shoddy work?

  • Dumet School

    Thank you so much for useful information. Really appreciate it.

  • Dumet School

    Thank you so much for useful information. Really appreciate it.

  • jrwells5

    The fact that 2 credit unions were initially included on this list as having secret agreements with two universities to market credit cards to students without there being any proof of the allegation and without contacting the credit unions appears to support whistleblower testimony before Congress that Bureau enforcement staff often plan actions against regulated entities prior to the conclusion of examinations or the discovery of violations. A single phone call to Purdue Federal CU would have uncovered that their agreement with the university was to market credit cards to alumni, NOT students.

  • JustAPlayer

    The Bureau makes a bad mistake and the only thing posted is “we’ve updated this post accordingly.” Where is the apology? Would you accept that type of response from a financial institution? Accept the blame for your mistake!!!

  • Credit_Union_Advocacy

    We are concerned that the CFPB’s blog on student lending, which flags “secret banking contracts” involving some financial institutions, included four credit unions. The irony of the CFPB’s listing is that the credit unions included are exemplary financial institutions. Typical of the approach credit unions take generally, these institutions work hard to provide students on college and university campuses with appropriate products and services at fair and favorable rates.

    It is unfortunate that the blog’s reference to the contracts leaves the impression that details of all of these arrangements are unknown to the public. While they all may not be available online, it is our understanding that a number of them are accessible to the public as a matter of state law or practices. In spite of the blog title, the CFPB notes in its letter to colleges that agreements “may potentially be available under state open records laws….”

    As you know, there is no current regulatory requirement to publicly disclose a financial institution’s contract with a college or university. Even so, some credit unions voluntarily choose to disclose these agreements, including two credit unions that were listed in your blog. The posting has now been updated to reflect that, and we urge the agency to refrain from additional blogs that do not accurately portray credit union practices in all instances.

    Unlike banks that have no restrictions on who they provide services to, credit unions may only serve those in their fields of membership. As a result, a credit union serving colleges or universities may be reluctant to disclose the contract with its university or college until the institution does so. An added wrinkle is that the Department of Education is currently working on a rulemaking to address how and whether such contracts should be disclosed. From a compliance perspective, it is certainly understandable that a financial institution may choose to wait for a final rule from the Department before updating its practices.

    The CFPB has repeatedly commended credit unions for their service, and we would like to work with the agency to highlight even more the great job credit unions do, including those that serve college and university campuses.

    Mary Dunn
    CUNA Deputy General Counsel

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