St. Cloud Times, MN
10-05-07
Universities under fire for pushing cards
Gannett News Service
DES MOINES, Iowa — In an arrangement seen in states across the nation,
Iowa’s two largest public universities are aggressively marketing credit cards to
their students as part of a deal that generates millions of dollars for the schools’
privately-run alumni organizations.
In Iowa and most other states, the financial details of those partnerships are
often shrouded in secrecy, despite the involvement of public universities that rely
on taxpayers.
Publicly, the University of Iowa and Iowa State University have expressed
concern over the debt of their students, many of whom graduate with $25,000 to
$30,000 in bills to pay. The schools say they are trying to reduce that debt load.
At the same time, the two schools have signed deals with their alumni
associations in which they have agreed to endorse, promote and profit from Bank
of America credit cards marketed directly to students.
Nationally, consumer advocates and state legislators are protesting such
activities. Federal legislation to curb on-campus marketing of credit cards is
under consideration, and U.S. Senate hearings are expected this fall. Iowa state
legislators have set hearings on the issue later this month.
“We’re very concerned about these exclusive contracts that provide kickbacks to
the universities,” said Ed Mierzwinski of the Public Interest Research Group. “We
want colleges to be responsive to their students.”
University and alumni association officials say the millions of dollars they collect
through the credit card deals benefit the schools and their students.
“Whether you say ‘kickbacks’ or you say ‘royalties,’ we’ve been upfront with our
constituency, and we share with them how we’re using those dollars,” said Jeff
Johnson, president of the Iowa State University Alumni Association. “We
have a commitment to student leadership and student scholarship.”
Under review
The Board of Regents, which oversees Iowa’s three public universities, is looking
into the situation.
“I find it deplorable that schools are facilitating on-campus marketing aimed
directly at students who have limited income and are struggling with debt from
student loans,” said state Sen. Tom Courtney, D- Burlington, co-chair of the
legislative Oversight Committee.
The University of Iowa and Iowa State University alumni associations are
considered public charities and are exempt from paying income taxes, but they
spend millions of dollars on marketing, promotion and merchandising.
Last year, representatives of Bank of America sat down to negotiate a deal with
the University of Iowa’s privately run alumni association that would guarantee the
company access to the home addresses, phone numbers and e-mail addresses
of University of Iowa students and parents.
The two eventually signed a confidential credit card marketing agreement in
which the bank agreed to pay the alumni association an undisclosed amount of
money.
The alumni association then signed a related contract with the university
guaranteeing the association — and, by extension, Bank of America — access to
publicly owned databases of information on students, parents and fans who
attend football and basketball games.
It’s an approach Bank of America and other credit card companies have used at
many U.S. schools. It enables some of the world’s largest financial institutions to
keep secret the amount of money they pay to use the assets — and even the
student athletes — of public universities.
The alumni associations say that because they are private, nonprofit
corporations, they’re not subjected to public-disclosure laws that would otherwise
force them to reveal their contracts with Bank of America.
With the associations acting as a conduit between public schools and Bank of
America, the money that changes hands as the banks gain exclusive access to a
campus remains largely hidden from view.
Robert Manning, a professor of consumer finance at the Rochester (N.Y.)
Institute of Technology, calls that process a form of legalized money laundering
that is intended to obscure the flow of cash between public institutions and
private corporations.
“There’s too much money sloshing around, and there’s no accountability,” he
said.
Access to athletes
The University of Iowa has agreed to promote the Bank of America cards by
giving the biggest spending cardholders exclusive access to university facilities,
employees and even student athletes. The school’s contract with the alumni
indicates cardholders who accumulate enough points are entitled to private, 90minute meetings with coaches as well as meals with student athletes.
At the University of Iowa and Iowa State University, students and others can
request that access to their basic contact information be restricted. Otherwise,
the schools say, that information is treated as public and given to everyone who
asks — including The Des Moines Register, which recently asked for and
received a copy of the most recent U of I database given to Bank of America.
But records obtained by the Register indicate Bank of America could be gaining
access to university information that isn’t available to others.
For example, a memo of understanding between the U of I and its alumni
association states that in connection with the credit card program the school
“may, from time to time, disclose to the association” both public information and
unspecified “nonpublic information.”