Resumo de The Dirty Secret Of Campus Credit Cards: "part Ii"

Surrounded by Secrecy
Professor Leech, with her specialty in consumer affairs, was particularly sensitive to how customers would be treated in such situations. She also has been involved in the Consumer Federation of America (CFA), the consumer advocacy group based in Washington, D.C., and currently serves as its vice-president. When she found out about the terms of the Virginia Tech card she began quietly to campaign to persuade students to avoid the card. "I told whoever would listen not to use that card," Leech remembers.
One thing that Leech has objected to in particular is the secrecy surrounding the contract between Virginia Tech and Chase. When she began asking the alumni association questions about how Chase was selected, the criteria for the bidding process, and the specific terms of the university''s deal, she was met with a brick wall. "These deals are kept very close to the chest," she says.
Virginia Tech isn''t alone in this regard. Universities closely guard the financial terms of their agreements with card companies. This is true even in public schools, where open contract laws typically mandate transparency. "Schools don''t want the public to see money made on these deals and so they broker the contracts through incorporated entities," explains Robert Manning. "There is so much of this money unaccounted for."
Benefits Scholarship Funds?
Only a handful of the contracts have been made public. It was in a hearing held by the U.S. Senate Committee on Banking, Housing and Urban Affairs where Manning testified that a contract between the University of Tennessee and FirstUSA was worth $16.5 million over seven years. He also testified that the University of Oklahoma received a $1 million signing bonus from MBNA.
A spokeswoman for the University of Tennessee said that its affinity card is marketed primarily to graduate students and alumni, not undergraduates. In addition, the school?which last year signed a new affinity contract with Chase for $10 million over seven years?sends the bulk of the money from such contracts to private scholarships.
When so much money is at stake, Leech and other advocates worry that the schools are seeking out the best contract for their own financial interest, not the students''. "The university is not demanding consumer-friendly terms, instead they are just seeing what credit-card companies offer them," says Leech.
Funding Financial Literacy
Tillar, from Virginia Tech''s alumni association, says that when the school renewed its affinity card contract roughly a year-and-a-half ago, it did have a choice of two banks?Bank of America and Chase. Still, the bidding didn''t allow Virginia Tech to negotiate better features on the affinity card, ensuring only that it could get a more competitive royalty package. "The bargaining is really with the royalty fee that is offered by the banks," says Tillar. The money, Tillar says, goes toward operating costs for the alumni association.
Some advocates argue that any money made from such credit card contracts should be used for financial literacy programs, to make sure students use credit responsibly. Manning has been campaigning for such programs, as well as for a reserve fund to bail out students who end up over their heads in debt. At Virginia Tech Tillar hopes to use some money from the Chase contract to provide financial literacy education, although the program hasn''t been set up yet.
All of these steps are too modest for Leech. She says that the relationship between universities and credit card companies is simply too complicated to keep. "These affinity contracts are compromising and people need to wake up and examine them."

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