Banks and universities have maintained a secretive, mutually beneficial relationship for years. However, new credit card legislation could fundamentally alter an arrangement that has enabled colleges to profit by providing card issuers with exclusive access to students and alumni.
The law, which takes effect Feb. 22, 2010, will also mean the departure of a ubiquitous college ritual — credit card solicitation booths that offer free hats, T-shirts or pizza.
That’s because the Credit CARD Act of 2009, signed into law May 22 by President Barack Obama, includes a variety of measures to protect consumers under age 21 from being targeted by unsolicited card offers. Read the act.
College-related measures in the legislation include:
- Required disclosure of the lucrative, cozy relationships between banks and colleges, under which banks paid millions for the right to market credit to students and alumni.
- A ban on offering gifts for applying for a credit card on campus or at university-sponsored events.
- A recommendation from Congress that colleges adopt specific card-related policies. These policies would mean that banks that continue to market their credit cards on campus would be required to notify the college where that marketing was physically taking place, that these locations would be limited and that debt education classes be offered as part of new student orientation.
Student card marketing targeted
The law follows government scrutiny of card marketing practices at universities, including a probe by New York State Attorney General Andrew Cuomo’s office into the agreements between banks and colleges in that state.
But the issue isn’t exclusive to the Empire State. Another such deal in Florida was spotlighted last year by the Consumer Warning Network, which released a confidential document that outlined how Florida State University’s alumni sports boosters were guaranteed millions of dollars spread over several years for providing MBNA America with mailing lists that contained contact information — including names, physical addresses and e-mail addresses — for thousands of FSU students and alumni. MBNA has since been acquired by Bank of America.
Bank of America is hesitant to discuss how the new legislation could impact future college marketing efforts. Spokeswoman Betty Riess said that while it remains too early to comment on the current legislation, the bank is committed to abiding by school rules. “Any on-campus marketing is with the permission of schools and in compliance with any campus restriction and state regulations,” Riess says.
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Additionally, BofA stresses that credit educational materials are provided to students alongside any card offers. “We do have a very strong financial education program for students,” Riess says.
As for those giveaways (such as pizza and T-shirts) used to attract campus cardholders, BofA says such freebies aren’t a common tactic. “We do very limited, small gift offers,” she says. “But they usually are tied to opening a student checking account or any event open to the public, like an athletic event, where we aren’t specifically targeting students.”
See related: Credit card reform and you, Obama signs credit card reforms into law, Will new credit card law hurt more people than it helps?, Congressional testimony: Student credit card issuers under investigation, Florida State: We have met the credit card monster and he is us