The kinds of agreements between credit card issuers and colleges came into stark focus a few years ago, as the schools were essentially selling data on students, faculty, staff and alumni to financial institutions. But after a federal crackdown, those problems have slowly receded.
The number of issuers, agreements, accounts both existing and new, and payments by credit card lenders to universities all improved on a year-over-year basis, and all but the number of lenders involved in these agreements have fallen considerably since 2009, according to the latest data released annually by the federal Consumer Financial Protection Bureau. The information was submitted to the agency by lenders for agreements existing through December 31, 2011. The CFPB gained control of the oversight of this type of agreement when it obtained full regulatory power in July of last year. Previous to that, these surveys were conducted by the Federal Reserve Board.
The Credit Card Accountability, Responsibility and Disclosure Act requires that federal regulators gather annual data about the agreements between lenders and universities related to the marketing of credit cards to those affiliated with the school in some way, the report said. The survey has been conducted since 2010, when the first report relied on information submitted to the government through the end of the previous year.
Since that time, the number of issuers involved in these agreements has risen, to 21 at the end of last year from 2009's 18, the report said. However, the most recent figure was also down from the 22 observed in 2010.
On the other hand, the number of the agreements between these financial institutions and colleges and universities declined considerably over the course of 2011, the report said. At the end of last year, there were just 798 of them, compared with 1,005 in 2010 and 1,045 in 2011. That's a decline of 247 agreements overall, or 24 percent in three years.
Similarly, the number of accounts slipped to slightly more than 1.5 million, down from more than 1.7 million in 2010, the report said. That's also a decline of more than 538,000 from the 2009 total of more than 2 million, and a drop of 26 percent. Consumers also opened fewer accounts with these programs through the end of last year, with just 43,010 new cards issued, down from 46,385 and 55,747 in the previous two years, respectively. That's a drop of 12,737, or 23 percent.
Finally, the total amount shelled out by lenders for these agreements slipped 13 percent over the three-year period, to more than $62.4 million, the report said. That's down more than $22 million from the $84.4 million in 2009, as well as a year-over-year improvement from the $73.5 million in 2010.
A closer look
When it comes to lenders responsible for these accounts, one stands out well above the rest, the report said. Of the 798 existing agreements, 633 were with FIA Card Services, a subsidiary of Bank of America, making up more than 1.26 million such accounts, including 23,103 new ones last year. That's roughly 80 percent of all such agreements. In all, FIA paid out nearly $44.7 million to colleges. The next-highest payer in these agreements gave colleges and universities slightly less than $2 million last year.
However, even FIA has seen its participation in the business dwindle fairly rapidly, the report said. At the end of 2010, it had 848 in place, but 216 were terminated over the course of that year (93 percent of all closed deals in 2010). It lost a total of 221 last year. Further, it only struck one new deal in all of 2011, meaning that its net loss of contracts came to 215. Chase Bank, which used to be the second-largest participant in these agreements, had the bulk of remaining losses, shedding 11.
Meanwhile, some lenders stepped up their participation, led by Capital One, the report said. It took on 22 such agreements, bumping its 2011 total to 31 from the previous year's nine.
The college end
For the most part, it's now alumni associations reaching these deals, the report said. At the end of 2011, a reported 337 of the 798 agreements were held with these organizations, paying them more than $38 million. Another 260 were with colleges themselves, and 145 more came from "other organizations."
These agreements are generally considered to be troubling to college students, but if you're worried about the effect that opening a credit card from such a deal would have on your finances, it might be wise to first order a copy of your credit report. By doing so, you may be able to check for any unfair markings that may drag your credit score down. Working with a credit repair law firm might help you set these problems right.