Rules, Regulations, and Reform
A Card Is a Card
In my last email, I discussed the CARD Act of 2009, a law enacted to protect consumers from deceptive or unfair business practices regarding credit cards. Noteworthy about the CARD Act is language directly aimed at college and university campuses. Since then, there have been a number of articles published about a new type of debit card called a student loan card. Articles from both traditional print and online blogs point out that student loan cards have created conversations on campuses because these cards seem to sidestep the intent of the CARD Act.
The fact is "student loan cards" are neither new nor different. They are simply debit cards marketed to college and university students as a vehicle for disbursing Title IV credit balances — i.e. government-backed student loans. As a refresher, there are basically three types of debit cards:
- Bank Cards: Debit cards linked to a traditional consumer bank account, sometimes known as check cards.
- Prepaid Cards: Debit cards that operate on the open networks of Visa, MasterCard or Discover, but are not linked to a traditional bank account. Funds are initially "loaded" on the card and the cardholder can most often "re-load" the card, if desired.
- Private-label Cards (Gift Cards): Special type of pre-paid cards issued primarily by retailers that run on closed, private networks. Gift cards are not normally reloadable.
Since the CARD (Credit Card Accountability Responsibility and Disclosure) Act doesn't explicitly refer to debit cards (except for a limited reference to gift cards), marketing debit cards to students is within the letter of the law. But as the recent articles point out, the purpose of the CARD Act is to provide consumers, especially students, with a full understanding of fees, charges, and any exclusive or monetary relationships between the school and card issuers. The bottom line is do your homework on how fees are charged to your students. Then, disclose, disclose, disclose. That is the spirit of the CARD Act and the best way to stay out of the headlines.
Thanks for reading.