According to annual Federal Reserve Board of Governors’ (FR
Reports to Congress, credit card lending is the most profitable form of banking.
But the credit card industry is saturated. The average adult had nearly five credit cards in 2006 and the average household received 5.7 credit card solicitations monthly in 2004, according to the 2007 FRB report (See footnote 1).
Banks seeking even greater profits from credit cards have several options:
First, as has been widely reported and is the subject of Congressional inquiries, banks can squeeze their existing customers for greater profits in several ways, including
(A) using a variety of rewards and tricks such as encouraging extremely low minimum payments to maintain highly-profitable high revolving card balances;
(
raising interest rates on those balances through a variety of traps including imposition of penalty interest rates for late payments and changing due dates to encourage more of those late payments;
(C) using misleading teaser rates; and,
(D) raising the rates of otherwise good customers by claiming that their credit score had declined or that they were late to another lender (called “universal default”); (See footnote 2)
Second, banks can market to customers of other credit card companies, urging them to switch by offering low teaser rates on balance transfers and other incentives. But this marketing is expensive both because of the cost of the zero-interest offers and the cost of sending out the billions of solicitations;
Third, banks can seek out customers who have never had a card. College students are among the most prominent targets for this marketing (See footnote 2). They are young and understand that they need credit to get ahead in the world. Some need credit because of the rising cost of a college education.
Fourth, most student credit card prospects are clumped together on campuses that they either commute to or live at. This makes them easy to target. Companies use a variety of techniques, from buying lists from schools and entering into exclusive marketing arrangements with schools to marketing directly to students through the mail, over the phone, on bulletin boards and through aggressive on-campus and “near-campus” tabling— facilitated by “free gifts.”
This study is an in-person survey of a diverse sample of over 1500 students, primarily single undergraduates, at 40 large and small schools and universities in 14 states around the country conducted between October 2007 and February 2008. The study analyzes how students pay for their education, how many use credit cards, as well as they use their credit cards and, finally, their attitudes toward credit card marketing on campus.
This study finds that students are using credit cards in significant numbers and that many are paying late fees, high balances and incurring delinquencies. The findings also show that banks are marketing aggressively to students through a variety of channels. Finally, the findings demonstrate that an overwhelmingly majority of students support limits on credit card marketing on campus to rein in unfair bank practices.
Get more resources, including contracts between banks and universities, here:
www.truthaboutcredit.org/campus-credit-card-trap/resources
Documents relating to relationships between University of Iowa and Iowa State University and their alumni associations for exclusive on-campus marketing arrangements with Bank of America (first obtained through public records request by Des Moines Register - See U of I, Iowa State use student data to sell credit cards, by Clark Kauffman, Des Moines Register, September 23, 2007. Scroll down right side for “related stories” in the series).
Note that MBNA is referenced in many documents. MBNA is a predecessor credit card company that is now a division of Bank of America known as FIA Card Services.
University of Iowa (UI) Documents
* May 2007 Student Direct Mail letter from Alumni Association offering UI branded Bank of America credit card - Download Document
* Memorandum of Understanding between the State University of Iowa, hereafter referred to as the “University,” and the State University of Iowa Alumni Association, this document includes details on sharing of student information files for marketing - Download Document
* EXHIBIT A (August 2006) Commitment of the University’s services and information to the (Alumni) Association (amending Exhibit A in the above MoU) - Download Document
* 2006 Memorandum of Understanding between University of Iowa and University of Iowa Alumni Association concerning licensing - Download Document
Iowa State University (ISU) Documents
* Fourth Amendment (2005) to the ISU Alumni Association and ISU Department of Athletics Affinity Agreement With MBNA (now BofA) - Download Document
* 2004 Memo from Alumni Association describing MBNA affinity card and royalty agreement with ISU Athletic Department - Download Document
* Plus Rewards Addendum (2002) to Agreement between ISU Alumni Association and MBNA - Download Document
* Attachment 3: Iowa State University Trademark and Licensing Agreement - Download Document
* Second amendment (1999) to ISU Alumni Association and ISU Department of Athletics Affinity Agreement With MBNA (now BofA) - Download Document
* 1995 List Agreement between ISU Alumni Association and MBNA - Note that this document refers to providing lists of “constituents,” which are defined in the next document (1995) to include undergraduate “student customers.” - Download Document
* 1995 Affinity Agreement between ISU Alumni Association and MBNA - Download Document
Documents relating to Ohio Attorney General Investigation of credit card marketing by Citibank and Potbelly Sandwich Works
Complaint in the Common Pleas Court of Franklin County, Ohio:
* State of Ohio and Marc Dann, Attorney General vs. Citibank, Potbelly Sandwich Works and Scott Simmons, filed September 19, 2007 - Download Document (Complaint for unfair and deceptive practices in violation of the Ohio Consumer Sales Practices Act. Defendants “deceptively offered “free” food and beverages to college students.”)
* Also see one page Potbelly advertisement extracted from complaint - Download Document
* News release: Attorney General announces agreement with Potbelly, March 10, 2008 - Download News Release (Innovative Deal Gives Students a Night at the Movies, Citibank remains defendant.)
* State of Ohio and Marc Dann, Attorney General vs. Campus Dimensions and OSU La Bamba filed September 19, 2007 - Download Document (Campus Dimensions is a marketing firm; La Bamba is a restaurant. A flyer is included in the document.)
