Changes in the College Affinity Card Market Since the CARD Act

		Number of Card Agreements, Cardholders, and Payments Declined in 2009–2012

Since the CARD Act was passed in 2009, the numbers of college affinity  card agreements and cardholders have decreased, according to data  from the Federal Reserve and CFPB. From 2009 through 2012, the  number of card agreements declined from 1,045 to 617 (41 percent). In 2012, 23 credit card issuers offered college affinity cards.issuer—FIA Card Services, N.A., a subsidiary of Bank of America—had  412 of the 617 reported agreements (67 percent of the market). All of the reviewed agreements included provisions allowing the card  issuers to use the trademark or logo of the institution of higher education  or organization. Payments to Organizations under the Agreements

All but one of the 39 reviewed agreements contained information about  the payment arrangement between the issuer and the affiliated  organization or institution of higher education. Marketing to Students Appears to Have Declined

According to available data and representatives of card issuers and  affiliated organizations, marketing of college affinity cards and college  student credit cards directly to students appears to have declined. Four large issuers of affinity cards,  representing 91 percent of the market (as measured by 2012  cardholders), said they did not actively market these cards to students— that is, they did not market on campus or specifically target students  through direct mail, e-mail, print or broadcast media, or their other  marketing venues. Representatives of five affiliated organizations with  affinity credit card agreements corroborated these statements; they told  us that the card issuers no longer marketed their affinity cards to  students, focusing instead on alumni. For example, they noted that issuers no  longer conducted on-campus solicitations at sporting events and other  university functions, as they had in the past. According to annual surveys of college students conducted by Student  Monitor, a market research firm specializing in the college student market,  the number of students obtaining a credit card in response to a solicitation  through direct mail or on campus has dropped significantly in recent  years. The proportion of students reporting that they obtained a credit  card as a result of a direct mail solicitation declined from 36 percent in  2000 to 6 percent in 2013 (see fig. Effect of College Affinity and Student Cards on Student Credit Card Debt Largely Is Unknown

Data are not available to definitively determine the effect that affinity  cards and college student cards have had on student credit card debt. However, students’  overall use of credit cards appears to have declined in recent years. For example, a 2012 study that examined the effect of  the CARD Act reviewed affinity card agreements and surveyed college  students on their use of credit cards, but it did not seek to determine the  impact of particular types of credit cards. College Affinity Cards

The effect of affinity cards on student credit card debt may be limited  because fewer students appear to hold these cards, which generally have  not been marketed specifically to college students since at least 2009. Number of Students with Credit Cards

The two studies suggest that the number of students owning credit cards  declined in recent years. In 2010, the  median credit limit for all bank-type general credit cards was $15,000.contrast, Student Monitor found that more than 60 percent of credit cards  owned by students had credit limits of $500 or less, and 80 percent were  $1,000 or less. Student Monitor found that 72 percent of students  reported paying their outstanding charges in full each month in 2013. One quarter of students in the 2013 Student  Monitor study reported paying a late payment fee at least once since  acquiring a credit card, with almost half of that group incurring more  than one late fee. Appendix I: Objectives, Scope, and Methodology

This report examines (1) the trends associated with and characteristics of  college affinity card agreements, (2) the extent of marketing for college  affinity and college student credit cards, and (3) what is known about the  effect of the use of affinity cards and student credit cards on student  credit card debt. To identify the trends and general characteristics associated with college  affinity card agreements, we reviewed the 2010 and 2011 Report to the  Congress on College Credit Card Agreements, which the Board of  Governors of the Federal Reserve System (Federal Reserve) issued, and  the 2012 and 2013 College Credit Card Agreements: Annual Report to  Congress, which the Bureau of Consumer Financial Protection (also  known as the Consumer Financial Protection Bureau or CFPB) issued. Third, we  included the five largest agreements with institutions of higher education,  as measured by the number of cardholders under those agreements. We reviewed these agreements and collected information using a data  collection instrument (DCI) to gather characteristics such as their effective  date, duration, allowed marketing practices and target populations,  payments to the organization, consumer protections, and service  standards. Lastly, we reviewed provisions of the  Credit Card Accountability Responsibility and Disclosure Act of 2009  related to affinity credit cards and credit card use by those under 21.
Why GAO Did This Study

Institutions of higher education, alumni groups, and other affiliated organizations may enter into agreements with credit card issuers for “college affinity cards,” in which issuers use the institution's name or logo in exchange for payments. Separately, some credit card issuers offer “college student credit cards,” which are expressly targeted to students. Partly in response to concerns about card issuer practices and rising student credit card debt, Congress passed the Credit Card Accountability Responsibility and Disclosure Act of 2009. The act includes consumer protections and requires disclosures specifically for consumers under the age of 21, including limits to on-campus credit card marketing and requirements for public disclosure of affinity card agreements. The act mandates that GAO review these agreements and assess their effect on student credit card debt.
This report examines (1) trends associated with and characteristics of college affinity card agreements, (2) the extent of marketing for college affinity cards and college student credit cards, and (3) what is known about the effect of use of these cards on student credit card debt. GAO analyzed data from the Federal Reserve and CFPB, including a sample of 39 affinity agreements filed by the issuers. GAO also analyzed data on student credit card use or indebtedness, and interviewed officials from federal agencies, credit card issuers, and affiliated organizations.

What GAO Found

Trends associated with college affinity card agreements include fewer agreements and cardholders and declining payments, according to data GAO analyzed from the Board of Governors of the Federal Reserve System (Federal Reserve) and the Bureau of Consumer Financial Protection (CFPB). The number of affinity card agreements declined from 1,045 in 2009 to 617 in 2012 (41 percent). More than 70 percent of the agreements in 2012 were with institutions of higher education or alumni organizations, and one issuer—FIA Card Services, a subsidiary of Bank of America—had 67 percent of all agreements. Affinity card issuers paid $50.4 million to all organizations in 2012, 40 percent less than in 2009. In most cases, payments were based on numbers of cardholders and the amount spent on the cards. The card agreements covered contractual obligations related to such things as marketing practices, target populations, use of the organization's logo or trademark, terms of payment, and, in some cases, service standards.
Student-focused marketing of affinity and student cards on campus appears to have declined. Four large affinity card issuers GAO interviewed (representing 91 percent of cardholders) said that they primarily targeted alumni and no longer marketed affinity cards directly to students. In interviews with GAO, institutions of higher education and affiliated organizations agreed that affinity card marketing directly to students had ceased. In addition, five of the nine largest overall credit card issuers that also issue college student credit cards told GAO they no longer actively marketed these cards (such as through direct mail, e-mail, or on-campus activity), but rather relied upon websites and bank branches. Representatives of five institutions with large affinity card agreements told GAO that they generally noticed a decline in on-campus credit card marketing in recent years. Consistent with these observations, available data show a decline in card solicitations to students in recent years. For example, a survey of students in 2013 by Student Monitor, a research firm, found that 6 percent of students reported obtaining a credit card as a result of a direct mail solicitation, compared with 36 percent in 2000.
Data are not available to definitively determine the effect that affinity cards and college student credit cards have had on student credit card debt. For affinity cards, the effect may be limited because fewer students appear to hold such cards. For college student credit cards, the effect is difficult to determine because data are available for credit cards in general but not for student credit cards in particular. However, students' overall use of credit cards appears to have declined in recent years. For example, Student Monitor reported 33 percent of students owned credit cards in 2013 versus 53 percent in 2004, a trend corroborated by several other studies that GAO identified. But Student Monitor found that students with credit cards in their names increasingly obtained the cards before starting college. In addition, it found that in 2013, students charged an average of $171 monthly on their cards, 80 percent of the cards had a credit limit of $1,000 or less, and 72 percent of students said they paid their outstanding charges in full each month. Student Monitor also reported that one quarter of students in 2013 paid a late payment fee at least once since they acquired the credit card, with almost half of those paying more than once.

What GAO Recommends

GAO makes no recommendations in this report.