Sarah Comtois, a senior at the University of
Toledo, recalls arriving on campus as a freshman and getting her first
taste of adulthood: a credit card.
“It was pretty easy to get,”
said the 23-year-old communications major from Westlake, Ohio, near
Cleveland. She also got a UT Rocket Card — a debit card good for
expenditures on campus — but, she said, “I couldn’t go shopping at the
mall with that.”
The credit card was “great for buying clothing and just going out — nothing responsible,” Ms. Comtois said.
That
attitude is music to the ears of credit-card companies, who swarm
college campuses and their fringes armed with gifts, food, financial
advice, and often money for the schools or their alumni associations,
in an effort to sign up new (and soon to be wage-earning) customers.
“The
industry looks at students as a type of Holy Grail because if they can
get their card to be the first card in someone’s wallet, they may keep
it for a very long time,” said Ed Mierz-winski, program director of the
U.S. PIRG Education Fund, a consumer advocacy group which last week
announced a campaign to persuade more colleges to crack down on
credit-card marketing to students.
About 15 states restrict or
ban credit-card marketing to students on campus, but neither Ohio nor
Michigan is among them. Both states let their colleges and universities
decide how to handle the situation.
“We are more concerned with
how these companies are marketing to students and are they doing it
deceptively,” said Michelle Gatchell, a spokesman for Ohio Attorney
General Marc Dann. Michigan takes the same attitude, said Matt
Frendewey, a spokesman for Michigan Attorney General Mike Cox.
Mr.
Dann’s office recently teamed with lawyers from Ohio State University’s
Moritz College of Law to sue Citibank for deceptive practices. The suit
alleged that the bank and a local restaurant lured students off campus
with promises of free food and drink, provided after students filled
out credit card applications.
Creola Johnson, a law professor at
Ohio State, has studied card marketing to students, and said without
laws that ban or restrict marketers, states must aggressively guard
against deceptive practices.
“If you think about it, when we
think of victims of predatory practices people don’t normally think of
college students because they think of them as being rich in comparison
to most people who run into financial difficulty,” she said.
“But
I think the reason we don’t hear more horror stories about college
students is because their parents essentially bail the students out
when they run into difficulty in most cases.”
Ms. Johnson
studied two student suicides in Oklahoma: Mitzi Pool, 18, who in 1997
amassed $2,500 in credit-card debt, and Sean Moyer, 22, who ran up
$10,000 in credit-card debt. Both hanged themselves.
Those cases
prompted Ms. Johnson in 2002 to survey 400 Ohio State students about
how they would respond if overwhelmed by credit-card debt. Eight-two
percent predicted stress and 75 percent depression. Thirty-four percent
said they probably would use drugs or alcohol, and 27 percent said they
would steal to get what they needed.
Nearly 22 percent said they would consider suicide.
The
most recent national survey by Nellie Mae, a student loan firm, found
that 76 percent of undergraduates had credit cards in 2004, down 8
percentage points from 2001. The average outstanding balance was
$2,169, down 7 percent from 2001. More than half had carried balances
of less than $1,000. However, by their final year, 91 percent had
cards, and balances had risen to $2,864.
Robert Hammer, a credit
card industry consultant, said that although students remain a priority
for the industry, cooperation between schools and credit card marketers
has lessened.
Twenty years ago the universities decided to allow it, and made money off fees the industry paid them, he said.
But
recently, Mr. Hammer said, more schools “have been asking, ‘Do we want
the student to be solicited on campus, in the dorm?’ … It’s up in the
air how this will all shake out.”
In Ohio and Michigan, how marketers reach students depends on the institution.
The University of Findlay in Ohio and Adrian College in Michigan ban all solicitation .
Suzanne
Sullivan, a spokesman at Findlay, said, “Last year our president got a
report of a credit card company phoning students in their dorms. We
contacted them and asked them to stop.”
For years, though, credit card marketers have found easy routes around restrictions.
For example, Bowling Green State University bans solicitation on campus.
But
as a public institution, “If someone makes a public record request for
student contact information, we are required to provide that unless the
student doesn’t want their information disclosed,” said Kim McBroom, a
BGSU spokesman.
Data-mining
And companies mine such data regularly.
Forty-two
percent of students get their first credit card via direct mail, and
the average student gets 25 to 50 credit card solicitations a semester,
according to 2006 statistics by the United College Marketing Service,
an Oak Brook, Ill., firm that runs financial education seminars with
credit-card firms as sponsors.
“I have two kids, and they get something in the mail every day from credit card companies. It’s hideous,” Ms. McBroom said.
Off-campus promotions
Besides
mailings, marketers also hold off-campus promotions in Bowling Green
and offer free items to get students to attend and fill out
applications.
Jackie Schroeder, 21, of Ottawa, Ohio, a BGSU
senior and education major, said lines of students at restaurants,
banks, or other locales in town in the fall are common sights.
“You can get credit cards in five or 10 minutes here if you really want one,” she said.
Some
students on campuses fill out an application using false information
just to get the T-shirt or food coupon as a gift, and know that the
card won’t be approved, experts said.
Ohio State and the
University of Michigan in Ann Arbor ban all credit card marketers
except one — Bank of America. Both schools have exclusive deals with
the bank, formerly known as MBNA, to supply affinity-branded cards
through their alumni associations.
Access to information
Bank
of America gives money to the alumni association and receives data on
students and faculty that allow them to be solicited, usually by mail.
The
approach, often secret, is how credit-card companies gain access to
otherwise private databases on students, parents, and fans of a
school’s athletic teams. Recently, the Des Moines Register newspaper
obtained public records showing that the University of Iowa alumni
association was receiving $550,000 annually from Bank of America for
access to data lists the association gets from the university.
Close relationship
“This
is why you won’t see a lot of schools banning credit card companies.
They’re getting too much money from them,” said Ms. Johnson, of Ohio
State.
Betty Reiss, a Bank of America spokesman, said the company prefers affinity card arrangements to other forms of marketing.
“Our
primary channel for marketing for our cards is through our banking
centers, because our objective is to obtain a long-term relationship
with a customer,” she said.
Chase Bank recently partnered with
BicyTaxi, a firm that provides taxi service via small pedal-powered
vehicles, on UM’s Ann Arbor campus. Chase paid the cost of free cab
rides to promote its +1 credit card by having drivers give riders
applications while en route.
Mr. Hammer, the industry
consultant, said that, although giving away T-shirts, iPods, food, and
cab rides works, the marketplace is demanding card issuers provide
financial education to reduce credit card abuse.
Potential pitfalls
Ms.
Comtois, the University of Toledo senior, said most students don’t know
about pitfalls. “No one ever told me anything about interest rates and
I didn’t know a lot about fees,” she said.
Demand for financial
advice has prompted card issuers to co-sponsor financial literacy
seminars at which they can hand out applications.
United College
Marketing Service said it will hold 1,100 such programs on campuses
this fall, with credit card firms sponsoring 70 percent of them.
Rather than ban credit card marketers, the University of Toledo lets them on campus, but makes them pay.
“Companies
are allowed to come and set up shop but only in the student union and
we charge them $125 a day to do that,” Jon Strunk, a UT spokesman,
said.
“That money goes to a fund to bring in financial
experts and others to campuses to provide financial education to teach
students how to keep their credit intact and avoid pitfalls.”
