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Thursday, Junk 17, aoio | The Red a Black
DEBT: College consumers line the pockets of Bank of America
► From Pago 1
accounts, said Tom Landrum, senior vice
president for external affairs.
That’s a little more than 5 percent of
student-held affinity accounts.
An affinity agreement is a mutual con
tract between two organizations. At the
University, credit cards in the affinity pro
gram can be emblazoned with either the
Arch or Uga.
In 2006, Cynthia Coyle, executive direc
tor of the Arch Foundation, signed an
addendum to the agreement ensuring the
organization would net at least $1 million
per year as an advance against future
royalties.
At that time, the benefits of the con
tract were transferred from the
UGA Foundation to the Arch
Foundation and will last until
2013.
Coyle said once Bank of
America pays the Arch Foundation,
the funds are equally split between
the Athletic Association, the
Alumni Association and the Arch
Foundation.
"The Arch Foundation gets
one-third,” she said. “We allocate
it out immediately."
The contract nets the University $1
per student card opened, plus 0.4 percent
of all retail transactions. According to the
contract, if the student has a balance at
the end of every 12-month period, the
University collects another sl.
However, Debbie Dietzler, executive
director of alumni relations, says that’s
not the case.
Dietzler referenced a 2006 addendum
that she said no longer requires the card
to carry a balance in order for the
University to collect.
“From my understanding, what they’re
considering the renewal is not about the
balance, rather [that it’s] an active card,”
she said.
But according to the 2006 addendum,
no such change exists.
“They are not making a great deal of
money from that,” Landrum said. “We
generate most of our funding from just
the original agreement [not renewal fund
ing].”
The story is similar for non-student
credit cards sl per account opened. 0.5
percent of all retail transactions and an
additional $1 if a balance remains on the
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GEORGIA SQUARE MALL. ATHENS
$lO Eye Glass Exam
with OGA l 0 s purchase of
any pair of glasses.
card at the end of every 12-month peri
od.
Landrum said affinity cards were not
originally created for students, but for
alumni who wanted to show school pride
,and raise money for their university at
the same time.
“It really comes down to an adult rela
tionship,” he said. “That in my mind is a
responsible action by an individual who
wants to help his or her school."
* • *
According to the contract, the annual
percentage rate for a non-student mem
ber is a variable rate of prime plus 7.9
percent and 9.9 percent for student mem
bers. But Riess wrote in an e-mail “the
rate on the Student Visa Platinum card is
14.24 percent plus Prime.”
However, in documents obtained
by The Red & Black, no change of
the original rate was noted.
The addendum states Bank of
America will not have to pay the
Arch Foundation the guaranteed
$1 million if it is prevented from
conducting at least five direct mail
campaigns and three telemarket
ing campaigns to the full list of
members.
According to the contract, Bank
of America is permitted to hold on-cam
pus promotions at major events, as well
as at least seven home football games
and three home basketball games.
However. Riess said bank representa
tives haven’t conducted tabling events
“for some time,” and haven’t mailed infor
mation to students for a couple of years.
Landrum said that while Bank of
America is still permitted to engage in
on-campus solicitation —as long as it fol
lows University guidelines and recent
credit card solicitation laws its appear
ance on campus “has been pretty spotty.”
He added the majority of students who
sign up for the cards do so at banking
centers, not at Tate Plaza tables.
In 2009, President Barack Obama
signed the Credit Card Accountability,
Responsibility and Disclosure Act, bring
ing sweeping change to the way banks
can solicit to consumers.
According to the legislation, people
younger than 21 would not be permitted
to sign up for a credit card without a co
signer or showing their means for repay
ment.
Additionally, the free gifts from banks
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to sign up for a card such as the ones
used to entice students in Tate Plaza
were prohibited when the legislation took
effect in February.
“It’s a good thing that they can’t really
entice you into it,” said Ashley Puckett, a
senior from Statham, adding the agree
ment negatively affects her trust in the
University. “It’s your own decision wheth
er you want to get a card or not.”
If Puckett were sitting in the same
Tate Plaza location a few years ago as she
was Wednesday afternoon, she may have
seen tables of Bank of America represen
tatives offering T-shirts, hats and Frisbees
to students in exchange for filling out
credit card applications.
Puckett said she, too, found herself in
debt to the tune of three credit cards.
Now down to two due to her part-time
job, she offered some advice to students
tempted by creditors.
“Don’t get more than one,” she said.
“Don’t spend more than you can pay off.”
• * •
As debt among students increases, so
does the amount the Arch Foundation
receives from the agreement. For fiscal
year 2010, the Arch Foundation netted
$1,294,855.62 —a more than 10 percent
increase from the previous year. The
University netted $1,168,808 in FY 2009
and $1,013,048 in FY 2008.
The money raised from the contract
for the Arch Foundation goes into a non
discretionary hind, and “every bit of it
goes back into supporting the activity of
the Arch Foundation,” Landrum said.
One of those activities includes the
President’s Club event, a $25,000 to
$30,000 gala where they “invite those
donors to the University of Georgia and
we invite them to a reception and tell
them how their funds are used,” Landrum
said.
John McCosh, spokesman for
CredAbility, a nonprofit credit counseling
organization, said it’s not necessarily a
bad idea for students to have credit cards,
provided it comes with a low credit limit
of about SI,OOO.
“Students are having more financial
problems, just like everyone else is, in
part because their parents are less likely
to come to the rescue if there’s a prob
lem," McCosh said.
His advice for students create a
budget.
“If you start to get in trouble, buckle
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down and try not to carry these habits
along later in life,” said McCosh, who said
he often advises clients with tens of thou
sands of dollars of debt who fell into bad
financial habits in their teens and young
20s.
McCosh stressed when someone
charges a purchase on a credit card, they
are taking out a loan. And like most
loans, credit cards come with interest
rates.
“In this economy, a good [interest
rate] would be probably the low teens,”
McCosh said, adding the 14.24 percent
interest rate plus prime from Bank of
America’s student card is “not bad.”
Riess said students in the Bank of
America program will not see an increased
interest rate for any reason, no matter
what.
“We take a fair and responsible
approach to lending,” wrote Riess when
asked to provide a statement regarding
the University profiting from student
debt. ”[A]nd, when we do provide credit
cards to students under 21 who have the
ability to pay or a guarantor with such
ability, we have different terms and a
strong educational component.”
Other universities, such as the
University of Michigan, have since made
agreements with Bank of America to
cease solicitation of affinity credit cards
to students.
While the University of Georgia has yet
to formalize any such agreement,
Landrum said he "would be open to dis
cussing with Bank of America any adden
dum."
Meanwhile, Coyle said she received
word from Bank of America that they are
not “actively soliciting any student right
now.”
“We’re very concerned and very cau
tious with our students they’re very
strict about who they give a card to,”
Coyle said, adding roughly half of student
applicants are denied credit.
But Landrum says the responsibility
belongs in the hands of the person swip
ing the card.
“As far as the University profiting from
the card because of debt, I don’t have any
hard data on that,” Landrum said. “I see
that as a part of a contract that is a stu
dent’s decision as to whether or not that
student wants to have a card, and wheth
er they want to have a balance. I don’t
see that as taking advantage of them."
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