The college crowd isn't as hip with credit card issuers these days.
The number of agreements card issuers had in place with universities and affiliated groups for affinity card programs declined 4% in 2010, and the amount of the money they paid such groups fell 13%, according to a report released Thursday by the Federal Reserve Board.
It is the second such report the Fed has released under the Credit Card Accountability, Responsibility and Disclosure Act, which requires issuers to submit information each year about agreements they have with colleges.
The CARD Act also put in place limits on issuers' ability to market to students by requiring borrowers under 21 to have a cosigner or demonstrate an ability to pay. It also prohibited issuers from offering free gifts to students for submitting a card application on or near a school campus.
"The figures should come as no surprise," said John Grund, a partner with the payments consulting firm First Annapolis Consulting in Linthicum, Md. "The affinity segment, specifically the college-university segment, was hit hard by the CARD Act and the dislocation caused by the broader credit crisis, as many legacy issuers retrenched from that market … or restructured programs."
"It will be challenging for the foreseeable future," Grund added.
There were 1,004 agreements in effect between issuers and universities or related organizations in 2010. The number of open accounts through these programs, which are often marketed to students and alumni, fell 17%, to 1.7 million, from 2009.
Issuers typically pay their partners fees based on new account volume, spending on the cards and other factors. Such fees declined 13%, to $73.3 million, from 2009, according to the report.
Such programs had been lucrative for issuers and colleges alike, giving banks a "captive member base" to tap to open new accounts and giving colleges access to a steady stream of revenue, Grund said.
The "triple whammy" of the credit crisis, subsequent recession and CARD Act "made the legacy approach to these programs very vulnerable," Grund said. "Many of the original programs were never constructed to weather a storm or a heightened level of regulation, so now there's a natural reset that has to occur, some of which is hard medicine."
Bank of America Corp.'s FIA Card Services subsidiary continued to dominate the college affinity market in 2010, accounting for 848 agreements in place, which is 15 times more than any other issuer, the report said.
The unit, which in February announced it was recording a $20.3 billion goodwill impairment charge for earnings in the first half of 2009 partly due to deteriorating credit quality and the CARD Act, paid $55.6 million to its partners in 2010.
Other issuers with a big presence included U.S. Bancorp, which had 54 agreements in effect in 2010 and paid $1.9 million to its partners, and JPMorgan Chase & Co., which had 28 agreements and paid $9.2 million.
