CFPB Report On College Credit Cards Highlights Importance Of Consumer Education
When it wasn't clear what they were signing up for, many college students went through the process of getting a credit card. Furthermore, those credit cards were issued in the context of agreements between credit card companies and colleges.
Oftentimes, those students signed up largely due to a lack of information and eventually found themselves in trouble with credit card debt as a result. With new rules in place to address that problem, college students are offered different options and therefore have fewer credit cards.
Here is an explanation of what happened, courtesy of InsideARM:
"A lack of transparency in the student loan and credit card markets led Congress to enact reforms to help the public better understand the marketing partnerships between colleges and lenders. In 2008, Congress passed a law requiring schools to disclose preferred lender arrangements with student loan providers and establish a code of conduct for school officials.
"In 2009, Congress passed the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act, which requires issuers to disclose to the CFPB the terms and conditions of any college credit card agreement, the number of new credit card accounts, and the compensation paid by issuers to institutions of higher education in the previous year."
With those rules in place long enough to see a trend, it is clear that a lack of consumer education was a key component of so many college students signing up for credit cards. As InsideARM notes, here are some of the changes that we have seen in the time since.
- College credit card agreements continue to decline
- College debit and prepaid card agreements are now more common than credit card agreements
- College credit card agreements are not readily accessible
There have also been changes to campus banking and an increase in prepaid cards and debit cards. In the larger scheme of things, this situation highlights the importance of consumer education when it comes to debt. How many other situations are there where a person is in debt simply because they were not informed? There are plenty, and that is why it is so important to work together with consumers to make sure all parties are informed about the situation.
That starts with improvements like this one with student credit cards and continues all the way through the conversations with collection agencies when those occur.