New Credit Card Law Takes Effect Feb. 22, 2010
By Ronald Stadler and Neil Wolf
In 2009, Congress passed, and President Obama signed into law, the Credit Card Accountability Responsibility and Disclosure Act of 2009 (H.R. 627). This new law, which becomes effective as of February 22, 2010, requires credit card companies that contract with colleges and universities to market affinity credit cards emblazoned with school logos and campus images must submit a report to the Federal Reserve Board detailing the terms of those contracts, listed by institution. The Fed will then compile a report and make it publicly available. A college affinity card issuer must file one report that includes copies of each of its college affinity card agreements. Those that fail to do so would be in violation of Truth in Lending Act requirements and could be sued by individual cardholders for up to $5,000.
The Act includes disclosure requirements for college, university, and alumni association credit card agreements. The disclosure language requires institutions of higher education to "publicly disclose any contract or other agreement made with a card issuer or creditor for the purpose of marketing a credit card." On January 2010, the Federal Reserve Board issued final regulations implementing the Act that include information on how colleges, universities, and their alumni associations can comply with the disclosure requirements in the law. The Fed's final regulations indicate that institutions can meet this requirement by posting the contract of agreement on their Web sites or by making it available upon request. Among other requirements, agreements must be disclosed in their entirety without regard to any confidentiality clauses.
Alumni Associations or Foundations Housed Within Institution
The new law also means that alumni associations that are not constituted as legal entities separate from the institution will now have to disclose all affinity credit card marketing agreements. However, if the association or foundation is a separate legal entity, then the institutional disclosure requirements do not apply.
Disclosure Requirements
Additionally, credit card companies must disclose marketing agreements with institutions of higher education, alumni associations, and affiliated foundations under which credit cards are issued to college students. This means that any card agreement where a student has been issued a card would be subject to disclosure by the credit card company. Final regulations released by the Federal Reserve Board:
- Clarify that "an agreement may qualify as a college credit card agreement even if marketing of cards under the agreement is targeted at alumni, faculty, staff, and other non-student consumers, as long as cards may also be issued to students in connection with the agreement."
- Define college student broadly. The definition includes students of any age attending an institution of higher education and applies to students enrolled in graduate or joint degree programs.
If you have not already done so, we encourage you to consult with your legal counsel to review this new law to ensure you are in compliance.