Des Moines Register
10-07-07
U of I, UNI refuse Regents' request on credit cards
They do disclose, along with ISU, that students' balances on the Bank of America
cards average more than $1,000.
By CLARK KAUFFMAN
REGISTER STAFF WRITER
Two state universities are refusing to disclose to the Iowa Board of Regents their
credit-card marketing agreements with Bank of America.
The agreements are believed to be similar to those at many schools and
universities nationwide, but they're also part of an increasingly controversial effort
by schools to promote and profit from credit cards marketed to students and
alumni.
Each of Iowa's three state universities made public new details of their credit card
programs late Friday in response to a series of questions posed by the Board of
Regents. However, officials at the University of Northern Iowa and the University
of Iowa did not provide the regents with copies of their alumni associations'
contracts with Bank of America.
But records released by the three universities show:
- While Iowa State University and the U of I give Bank of America access to
information and campus facilities in return for cash guarantees, the contracts with
the bank appear to have bypassed the state's open-bidding process by being
routed through the alumni associations.
- The average balance on the students' university-branded cards was more than
$1,000 at all three schools. Previously, ISU alumni officials said the average
student's balance was $389. The balance is significant because the credit limit on
some student cards is just $1,000, and students who exceed their limit are
subject to penalties, such as a 30 percent interest rate.
The Board of Regents launched its investigation into the state universities' credit
card programs one week ago, after the Des Moines Sunday Register reported
that the University of Iowa and Iowa State University were marketing universitybranded cards to students as part of an arrangement that generates millions of
dollars for the schools' alumni organizations.
Federal legislation to curb on-campus credit card marketing is pending in
Congress, several states have passed legislation in recent weeks, and a
government oversight committee of the Iowa Legislature is expected to hold
hearings on the matter later this month.
The credit card programs are now drawing fire from student leaders and Iowa
lawmakers. That's partly because of the solicitations aimed at students, but also
because public assets are being used to enrich the private alumni associations.
At the University of Iowa, the taxpayer-supported school has given Bank of
America exclusive use of university data, facilities, employees and even student
athletes to help promote card usage. But most of the money generated by the
credit card program is retained by the private alumni association.
At Iowa State University, the school is treating the alumni association's contracts
with Bank of America as public documents.
But UNI officials told the regents that release of the contract information is
prohibited by a confidentiality clause agreed to by the alumni. U of I officials have
said that while they've seen a copy of the alumni's contract with Bank of America,
they don't currently have a copy and are not willing to ask for one.
Regents Michael Gartner, Ruth Harkin and Jenny Connolly said Saturday that
they hadn't had a chance to review the 200 pages of university documents they
were sent late Friday.
Are alumni contracts public or private?
The refusal by UNI and the U of I to disclose the terms of their alumni contracts
with Bank of America sets the stage for a larger debate over whether the alumni
organizations are private corporations, as they claim, or extensions of the public
universities.
The answer to that question would determine whether the organizations are
subject to open-records laws and obligated to disclose their contracts with the
bank.
At the University of Iowa, the alumni association staff are all state employees.
The association president is hired and evaluated, in part, by the university
president. The school pays the alumni association more than half a million dollars
per year to manage the school's alumni records, and it has promised in writing to
give the alumni association access to unspecified "non-public information" that's
off-limits to the average citizen.
At the University of Northern Iowa, the president of the alumni association, Mark
Jastorff, works 40 hours per week for the organization but collects all of his pay
from the school. University officials say that's because Jastorff's responsibilities
as the school's director of alumni relations are inseparable from his duties as
head of the private alumni association.
"It is so meshed and inter-related that it's very difficult, if not impossible, to say,
'OK, today I am wearing this hat,' " Jastorff said. "Most days, it's impossible to
differentiate between the two jobs."
What the bank deals mean to the schools
Sen. Joe Bolkcom, an Iowa City Democrat, has said the alumni associations
"aren't just private organizations" and should disclose more information on their
deals with Bank of America. He also wants to ban on-campus marketing that
involves giveaways, such as free food and T-shirts, for credit card applicants.
Sen. Tom Courtney, D-Burlington, co-chair of the Legislative Oversight
Committee, has arranged for committee hearings on the matter, saying it's
"deplorable that schools are facilitating on-campus marketing aimed directly at
students who have limited income."
But the cost of voiding the contracts with Bank of America could be significant - if
not for the schools, then for the privately run alumni groups.
At ISU, officials say the school would lose a total of $207,200 in revenue. The
alumni association would lose $2.1 million in future revenue and be forced to pay
back $486,000 in advances from Bank of America.
At U of I, the alumni association would lose roughly $1 million per year, while the
losses to the school are characterized as "variable and difficult to predict."
According to UNI officials, the school receives no direct financial benefits from
the credit card agreement. As for the alumni association's potential losses, the
school isn't saying what those might be, citing the confidentiality clause in the
contract with Bank of America.
What documents show about university credit card deals
Here's a quick look at the details of the credit-card marketing programs at Iowa's
three state universities, based on state records:
UNIVERSITY OF IOWA
- Credit cards are marketed directly to students, with alumni officials suggesting
that students use them to pay for books, supplies and "quick cash" in an
emergency. There are 208 students actively using the cards, and they have an
average balance of $1,028.
- Alumni officials won't release a copy of their contract with Bank of America, but
they say they collect about $1 million in annual revenue from the credit cards.
The alumni association gives the school $200,000 of that money each year.
Some of the money given to the school is payment for $145,600 worth of football
tickets used by Bank of America representatives and others.
- To encourage card usage, the school and alumni association have offered
incentives to the biggest-spending cardholders, including private meetings with
coaches and group lunches or dinners with student athletes. Ten days ago,
school officials eliminated the use of individual athletes in those promotions.
IOWA STATE UNIVERSITY
- There are 289 students actively using the card, and they have an average
balance of $1,100.
- The athletics department has agreed to give Bank of America and the alumni
association the names and contact information of season and single-game
ticketholders. The school has also given the bank exclusive on-site access to
students and fans at athletic events.
- The school expects to collect about $40,000 per year from the arrangement.
That's about one-twelfth of the $500,000 the alumni association stands to collect
each year.
UNIVERSITY OF NORTHERN IOWA
- School officials say they haven't marketed the cards to students for the past five
months, but their contract with Bank of America allows for solicitations at school
events "with the alumni and friend base in mind." There are 55 students actively
using the school's Bank of America card, and they have an average debt load of
$1,148.
- Alumni officials won't release a copy of their contract with Bank of America. The
university derives no direct financial benefit from the program.
Reporter Clark Kauffman can be reached at (515) 284-8233 or
ckauffman@dmreg.com