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Colleges Sell Student Info to Credit Card Companies

By Randall Ryder

Colleges are selling databases containing the personal information of students and alumni to credit card companies. Under these arrangements, called “affinity” contracts, schools can earn bonuses for every card a student opens, and can earn additional bonuses when students carry a balance.

Congressman Patrick Murphy, a former professor, says that ”The fact that schools are getting paid for students to rack up debt is a disgrace . . . .” and added that banks paying schools to encourage student debt is the equivalent to kickbacks.

Lots of schools contract with banks

The new credit card legislation passed last year really only impacts the marketing on campuses, not affinity contracts. Bank of America, for example, allegedly has 700 affinity contracts with colleges.

The majority of affinity contracts require that schools share names, addresses, and phone numbers of students and alumni. For some schools, the contract means that they are turning over information for tens of thousands of students.

What schools get

The contract for each school varies, depending on certain factors. Bank of America, however, pays schools $1 for each account opened that stays open for at least 90 days. Some contracts require banks to pay schools $3 when students carry a balance on their card. Other schools may even recoup a small percentage (.4%) of all charges made on the card.

In response to criticism, some schools have renegotiated, or even abandoned their contracts with banks. These schools, however, appear to be few and far between.

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Full post as published by Caveat Emptor on June 22, 2010 (boomark / email).