October 27, 2010
The Federal Reserve released its first annual report on agreements between credit card companies and colleges. The report showed that credit card companies paid colleges and alumni associations and foundations more than $83 million in 2009 for the right to market credit cards to students and alumni.
The Chronicle of Higher Education reported that under the Credit Card Accountability Responsibility and Disclosure Act of 2009, or CARD Act, credit card companies are required to submit their agreements with colleges--information that was previously kept private--to the Board of Governors of the Federal Reserve. Additionally, companies must also disclose how much they paid colleges for the right to market on campuses, how many new accounts were opened and the total number of open accounts.
CNN Money noted that the CARD Act also prohibits students under 21 from obtaining a credit card without a co-signer. Furthermore, companies cannot entice new borrowers with giveaways if they are within 1,000 feet of the campus.
According to Inside Higher Ed, the board looked at 1,044 agreements between college groups and 17 credit card companies in 2009. Approximately 40 percent of the agreements were directly with colleges and universities, 33 percent were with alumni associations and the remaining share with foundations and other groups. Total payments amounted to $83,462,712. Companies opened 53,164 new accounts for a total of 2,008,714 open accounts as of December 31, 2009. FIA Card Services, an affiliate of Bank of America, accounted for a majority of the contracts, with 906 agreements. The company paid institutions nearly $62 million.
CNN Money reported that the University of Notre Dame received the biggest payment of any school. Chase Bank paid the school $1.8 million and, in the end, gained 77 new accounts. University spokesperson Dennis Brown said the school used the funds for financial aid.
Other top recipients included the University of Illinois Alumni Association, the Penn State Alumni Association, the University of Wisconsin Alumni Association and the Golden Key International Honour Society, stated Inside Higher Ed.
While agreements varied, many restricted schools from promoting products from other financial companies. Many universities also agreed to give companies access to student mailing lists. As The Chronicle of Higher Education pointed out, some have argued that credit card companies have deceptive marketing practices and that agreements violate students' privacy and foster credit card debt. An analysis of 17 contracts found that colleges were required to give companies personal information about students and, in some cases, paid more when students carried a balance on their new cards.
Compiled by Heidi M. Agustin
"Banks spend big to sell credit cards to students," CNNMoney.com, October 26, 2010, Amy Haimerl
"College Credit Card Agreements," federalreserve.gov, October 2010, Federal Reserve Board of Governors
"Credit-Card Companies Paid Colleges $84-Million for Cards Issued to Students and Alumni," chronicle.com, October 26, 2010, Rachel Louise Ensign
"Credit Card Companies Pay Millions to Colleges," insidehigered.com, October 26, 2010, Doug Lederman