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Monday, May 16, 2022

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Richmond ends credit card deal with Bank of America

Bank of America paid the University of Richmond $89,773 in 2009 as part of a controversial credit card program under which the university sold the bank student, faculty, staff and alumni contact information.

The program, which was initially started between Maryland Bank, National Association and the university, was continued by Bank of America when it bought MBNA in 2006.

The so-called affinity agreement, which ended June 30, 2010, allowed students, alumni, faculty, staff and friends of the university to have credit cards that sported a University of Richmond logo, said Louie Love, the director of treasury services at Richmond.

Part of the agreement called for the university to give its database of contacts to Bank of America for solicitation.

The database included names of students, faculty, staff and alumni and their addresses and telephone numbers. Bank of America also requested a refresh of the database about once or twice per academic year, Love said.

"Basically, when you enter into the agreement, they really want a mailing list so they can contact alumni and/or students and faculty and staff," Love said. "And so they were given what we consider public information."

Love stressed that this was no longer being done at the university and that a lot of times, the contact information they gave the bank was information that the bank had already received through other sources.

Those who were solicited could request to be removed from the mailing list, Love said. After the university received an email from someone requesting to be removed from the list, he or she would be flagged in the system. After that, Love said that he would call Bank of America immediately to notify them to stop the solicitation.

Since the seven-year affinity credit card agreement ended last June, the university has terminated its relationship with Bank of America.

Although university officials looked at several new proposals, they decided to not sign a new affinity agreement.

None of the plans paid much, and many had limited or no guarantees of revenue to the university, Love said. He said that creating a new affinity agreement might be something the university would do in the future if the economy changed, but it was not something that would be done today.

None of the new proposals for affinity agreements that he saw included the solicitation of students, Love said.

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Additionally, Love said that he had been told by Bank of America that it hadn't solicited his students in more than two years.

Betty Riess, a spokeswoman for Bank of America, said in an email that Bank of America had been amending its agreements over the past few years to exclude student names from the marketing lists the schools supplied to them.

"Even if the contract hasn't been formally amended, our practice since before the Card Act has been to exclude students from direct mail offers," Riess wrote in the email.

The CARD Act, a law passed in May 2009, is meant to bring changes to the way credit card companies do business and includes regulations to safeguard college students.

According to a Collegian article published in April 2006, students were receiving calls from telemarketers in their residence hall rooms, although the university was on the "do not call" list pertaining to telemarketers. That exclusion did not cover MBNA.

The bank issued about 800 credit cards through this agreement, Love said. Although the credit cards are still active, as of Dec. 31, 2010, the university stopped receiving benefits from charges made on those cards.

According to the agreement that had previously been confidential until October 2010, the University of Richmond received $1 for each new credit card that remained open for at least 90 consecutive days, another $1 for each card for which the annual fee was paid and 0.40 percent of retail purchases made by students.

This money went to the general operating fund, which paid for professors' salaries and things like the electric bill, Love said.Colleges should start looking for other ways to generate revenue besides using these affinity agreements that harvest marketing data from the college as a benefit of the relationship, said Bruce McClary, a certified financial educator and the media relations coordinator for ClearPoint Financial Solutions, a non-profit credit counseling company, which has its headquarters in Richmond.

Credit card affinity agreements were made available to the public under the CARD Act of 2009.

The Credit Card Accountability and Disclosure Act of 2009 forces universities to make their agreements with any credit card companies available to the public each year. The universities must also annually report how much revenue the university has received as a result of the affinity agreement.

The act puts more restrictions on students who want credit cards. Now, students under the age of 21 need someone to co-sign for them or they must be able to show proof that they are financially capable of paying for what they charge.

The CARD Act also limits the marketing incentives credit card companies are allowed to give students on campus or close to campus - the credit card companies cannot give away things like t-shirts anymore to promote students opening a credit card.

These affinity agreements have recently been under scrutiny, and the government has imposed stricter rules regarding marketing directed toward students.

McClary said it was important to keep in mind that the credit card agreements the Federal Reserve posted predated the restrictions that had gone into place for the Card Act.

"[Making the agreements public] certainly lets people know what's been going on so far... it shines light on a lot of practices that cause concern, such as the privacy issues with the sharing of the marketing information, and it draws a lot of questions as to what is that money being used for," McClary said. "A lot of colleges are raking in a lot of money. We're talking millions of dollars based on these affinity agreements."

The money should be directed toward promoting financial literacy on campus, McClary said.

Contact reporter Michelle Guerrere at michelle.guerrere@richmond.edu

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