The Consumer Financial Protection Bureau launched a campaign Thursday to examine the effect financial products marketed through colleges and universities such as Boston University have on students, CFPB officials said.
The CFPB will investigate the marketing strategies of financial products such as school-affiliated bank accounts — including those offered by Bank of America and Citizens Bank near the George Sherman Union — that grant access to student loans, scholarships and student identification cards that double as debit cards, according to the release.
“One of the things we put in our notice is how financial products are marketed to students through schools,” said Rohid Chopra, the CFPB student loan ombudsman. “There are restrictions when it comes to school marketing agreement in the credit card market.”
The aim of the inquiry is to determine whether the arrangements between colleges and banks or other types of financial institutions are in the best interests of students, according to a Friday CFPB press release.
“We have seen many colleges establish relationships with financial institutions to offer banking services to their students,” said Richard Cordray, CFPB’s director, in the release. “The Bureau wants to find out whether students using college-endorsed banking products are getting a good deal.”
Chopra said the investigation will obtain a full picture of a student’s financial life outside of student loans, such as how he or she opens bank accounts and uses credit cards.
“Student debt has topped $1 trillion, which is more than credit cards and auto loans,” Chopra said. “Students borrowing for college are no longer the exception — it’s becoming the norm.”
In 2009, the Credit CARD Act restricted financial organizations from using certain advertising tactics on campuses, aimed at college students, according to the release. The act made agreements between institutions of higher education and credit card issuers available to the public.
The CFPB also published a guide for college students and their families to aid with the decision process behind choosing a new credit card or checking account, according to the release.
Several BU students said while they do not frequently use credit cards, they are wary of incurring credit card debts.
“I have a bank account and debit cards and I can use those online if I need to buy something. But to me a credit card isn’t really necessary because it can’t do anything for me right now,” said Emma Maider, a College of Arts and Sciences sophomore. “It would only lead to me spending money I don’t have.”
Maider said she worries about hidden fees that will increase the difficulty of paying back her student loans.
She said she wants to avoid financial problems caused by a credit card and is thankful for CFPB’s investigation.
“Sometimes I feel as if [banks issuing credit cards to students] set students up for failure,” Maider said.
Ian Rollins, a College of General Studies freshman, said he does not often worry about being overcharged by campus-based banks.
“I would probably drop the credit card if I was being charged more because I’m a college student,” Rollins said.
CGS sophomore Becca Haley said she would only have a problem with paying back credit card fees if they were hidden.
“If the banks are targeting students for no reason other than we are oblivious, then I’m glad there is an inquiry,” Haley said. “Banks cannot target students unfairly and keep them from taking money from an already poor demographic.”
Laurence Kotlikoff, an economics professor at BU, said students have a difficult enough time paying back student loans as it is.
“The university has a responsibility to make sure kids don’t get in over their heads, and their parents have a prenatal obligation to make sure their kids don’t take on too much,” Kotlikoff said. “It’s true for every university and college because kids are not cognizant of the magnitude of their decisions, and parents are not always looking over their shoulders with their finances.”