RI’s Colleges Cashing in from Credit Card Companies
Tuesday, December 20, 2011
Credit card companies dished out nearly $1.5 million to Rhode Island’s colleges and alumni associations in 2009 and 2010 in exchange for valuable information that includes mailing lists, e-mail addresses and phone numbers for current and former students.
A GoLocalProv review of the little-known financial agreements shows institutions and private alumni associations were paid $1,434,876 in the two years since Congress passed comprehensive credit card reform laws.
The Credit Card Accountability Responsibility and Disclosure Act of 2009, which was cosponsored by Congressman James Langevin, placed restrictions on the marketing strategies used by companies to push credit cards on undergrads, including imposing an outright ban on using free merchandise to entice students into signing up.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTBut critics say the lucrative agreements between schools, their alumni associations and the credit card companies still promote unhealthy borrowing habits at a time when young people are becoming more saddled with debt.
Brown Alumni Association Tops the List
In most cases, schools or their alumni associations have an agreement with the banks that involves a large annual advance that usually comes within 45 days of the first of the year. If more students or graduates sign up for cards or accounts, the organization or institution is eligible to receive even more in payouts.
For example, the Brown University Alumni Association is paid $350,000 each year in exchange for access to private information about Brown graduates. The credit card company promotes several types of offers, including rewards cards, business cards and even car loans. Records show Brown’s Alumni Association has been paid a total of $728,183 since 2009.
Brown University spokesperson Darlene Trew Crist said that while the university itself does not profit from the credit card companies, the Alumni Association uses the funds received to support several alumni programs.
“Brown University does not market credit cards to students,” she said. “The Brown Alumni Association, which is a separate 501 3(c) organization, does offer Bank of America credit cards to Brown alumni. The income derived from this effort is used to support alumni programs such as club activities, faculty lectures, and class-related events.”
Promoting Unhealthy Borrowing
The same appears to be the case for Rhode Island College (RIC). Spokeswoman Jane Fusco said credit card companies are not granted access to undergraduate information, but the RIC Alumni Association does provide detailed information about graduates.
“At Rhode Island College, the funds are used to supplement the Alumni Association’s annual budget which helps to underwrite the college's alumni awards program, provide student scholarships, and publish the alumni magazines,” Fusco said. “The information released includes the name, address and class year of alumni with the exception of those marked “Do Not Contact” and/or “No Outside Vendors.” We do not release student information, nor does the alumni office have access to it.”
But while many colleges and universities maintain that they aren’t delivering sensitive information about their undergraduates simply to make a quick buck, critics contend institutions and their affiliates are still preying on students who graduate with loan debt and then open up credit cards pushed by their alumni associations.
Simon Moore, executive director of College Visions, the Providence-based nonprofit organization that assists low-income students with college preparation, said low and middle-income students are far more likely to be affected by unhealthy borrowing.
“The American narrative positions college as means to financial stability, career options, and civic engagement - especially for low-income students,” Moore told GoLocalProv. “But our higher education system is increasingly saddling graduates with student loan and credit card debt. When colleges promote unhealthy borrowing, they infringe on the social and financial mobility to which they've long provided access. I'm deeply concerned by the equity issues that arise from these policies, as low to middle-income students are much more likely to be adversely impacted.”
No Different than Other Programs
Providence College spokesman Steven Maurano said the school does not offer information about any of its students to credit card companies, but the PC Alumni Association receives $80,000 each year. Maurano said the funds go to alumni-related activities and credit card program is no different than programs offered by other organizations.
“It is similar in scope to any number of affinity card programs involving credit card companies,” Maurano said. “These days, there are a whole host of credit cards tied to any one of a wide variety of affinity programs, include some connected to specific companies/organizations (i.e., Boston Red Sox) to certain non-profit causes and so on.”
Maurano continued: “In our case, alumni sign up for the credit card at their discretion. When they do, they provide the appropriate information asked of them in applying for the card. That information is disclosed by them at their choosing as part of the application process.”
More Transparency
Others say the credit card reform laws have helped to curb the habits of companies attempting to profit off of undergraduate students. In fact, payments made by credit card companies to colleges and their alumni associations throughout the country were down 14 percent in 2010, dropping to $73 million.
Ed Mierzwinski. a consumer advocate for the National Association of State Public Interest Research Groups, said the agreements used to be very secretive and the credit companies were able to get away with a lot more.
“The transparency is good,” Mierzwinski said. “It’s okay to sell graduate lists [but] I don’t think colleges should be marketing credit cards to undergrads.”
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