CFPB Highlights Issues with University Affinity Financial Products
In a blog post on February 12th, the CFPB’s Student Loan Ombudsman, Rohit Chopra, identified practices that the CFPB views as problematic regarding financial product affinity agreements between financial institutions and universities.1 Chopra noted that the CFPB recently alerted financial institutions about what it sees as “the potentially risky practice of not readily disclosing arrangements with colleges and universities to market bank accounts, prepaid cards, debit cards, and other financial products to students.” CFPB Director Richard Cordray had also recently asked financial institutions to voluntarily disclose these arrangements.
Chopra identified several types of these agreements between financial institutions and universities:
- Direct payments for using school logos. In reviewing publically available agreements, the CFPB found several where a financial institution would offer a licensing fee in order to use a school’s logo to market its financial products.
- Bonuses for recruiting students. In other agreements, financial institutions provide bonus payments to schools based on whether students sign up for a financial institution’s student checking account marketed on campus.
- Discounted prices in exchange for marketing access. Under some agreements, schools received discounted or free services in exchange for allowing a financial institution to market financial products to students.
With respect to these types of arrangements, Chopra stated in the blog post that “voluntarily disclosing these arrangements is a sign of a financial institution’s commitment to transparency when marketing deposit accounts, prepaid cards, financial aid disbursement accounts, and other financial products to students.” Chopra also noted in the blog post that “[r]esponsible financial institutions also want students to know they don’t have to choose their product if they don’t want to.”
Consumer Advisory Board Meeting Scheduled
The CFPB’s Consumer Advisory Board has scheduled a meeting for February 26th and 27th in Washington, D.C. The Consumer Advisory Board, which is composed of experts in consumer protection, financial services, community development, fair lending, civil rights, and consumer financial products or services, was created by the Dodd-Frank Act in order to provide advice to CFPB leadership on a broad range of consumer financial issues and emerging market trends.
The CFPB has provided a copy of the meeting agenda,2 but only a portion of the meeting will be open to the public. During the closed session of the meeting, the Board will discuss, among other topics, the HMDA rulemaking and the Debt Collection Advance Notice of Proposed Rulemaking. At the public portion of the meeting, CFPB Director Richard Cordray will speak and the Board will listen to comments from consumer groups, community and industry representatives, and members of the public.