Banks Pay Colleges for Students' Names, Addresses
Landmark credit-card legislation signed into law last year halted some of the predatory tactics used by banks to attract student borrowers, but the new law hasn't stopped colleges from preying on their own students. Some of the nation's largest universities are selling students' names and addresses to credit-card companies for millions in kickbacks from big, bailed-out financial giants like Bank of America and J.P. Morgan Chase, the Huffington Post Investigative Fund reports.
Through inconspicuous collegiate-corporate relationships known as "affinity agreements," schools and their alumni associations not only profit from selling students' personal information, they also earn royalties for each student who keeps a university-sponsored credit card open for more than 90 days. Schools can earn up to three times more—about $3 per cardholder—when students carry a balance on these cards, and some colleges earn bonuses when students incur debt.
The Huffington Post obtained 17 contracts detailing affinity agreements between universities and banks, but it's unclear just how many of the nation's 2,700 four-year colleges are involved. At Brown, Bank of America agreed in 2006 to pay $2.3 million over seven years for students' names and addresses. At Michigan in 2003, the bank agreed to pay $35.5 million over 11 years for its student information. In total, BOA has affinity contracts with some 700 schools, and more than 100 schools are believed to have affinity agreements with other financial institutions, according to the Huffington Post.
Bank of America claims it's not taking advantage of students; rather, it's amassing a new base of loyal customers. But consumer advocates beg to differ, questioning whether colleges with affinity agreements are doing enough to safeguard young people from financial ruin. "Universities should place the welfare of their students as their highest priority," said Ed Mierzwinski, consumer program director for the federation of state Public Interest Research Groups. "[They] shouldn't sell them off for profit."