Alerting colleges about secret banking contracts
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|
|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|
|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.