Credit card companies cash in on students by pushing plastic on campuses
Wednesday, October 27, 2010; 8:20 PM
When will we stop pushing plastic on our young adults?
For years, institutions of higher learning and affiliated groups have struck deals with credit card issuers to market their cards to students, many of whom don't have any significant source of income.
Selling this access has been lucrative for schools and groups such as alumni organizations. In 2009, according to the Federal Reserve, 17 credit card issuers made total payments of $83.5 million for the privilege of marketing their products to students, faculty, staff and alumni.
And what did the credit card companies get in return?
Over the years the contracts have been in existence, more than 2 million college-related credit card accounts have been opened. Last year alone, the number of new accounts was 53,164.
In addition to getting access to mailing lists, issuers paid schools and affiliated organizations royalties for accounts opened and fees based on how much people purchased on the cards. So the more debt people piled onto their cards, the more schools collected in cash.
At least we now have a better grasp of these contracts because of the Credit Card Accountability, Responsibility and Disclosure Act of 2009, also known as the Credit CARD Act. The Federal Reserve now has to submit to Congress an annual report that sheds light on the deals struck by credit card companies with postsecondary institutions and their affiliates. The public also gets to see the details. You can view the 1,044 contracts submitted to the Federal Reserve by going to www.FederalReserve.gov/CollegeCreditCardAgreements.
This is the first comprehensive look at the agreements. But the Fed's report lacks any meaningful commentary or conclusions. We don't know exactly how many of the accounts were opened by undergraduates. Nonetheless, we've got more details of the deals than ever before, so now what?
I know what.
Congress should have the chutzpah to do what New York Attorney General Andrew M. Cuomo did after investigating student credit card marketing practices in his state.
Cuomo, the Democratic nominee for governor, got the State University of New York - with 64 campuses and 465,000 students - to agree that it would not share students' personal information with credit card companies without asking students first. Any deals cut have to be in the best interests of students. Schools also can't conclude a deal in which the school earns a percentage of finance charges imposed on students. If a school has such an agreement, it must stop accepting payments immediately.