FSU Profits Off of Student Credit Card Debt

July 10, 2008

FSU Credit Card Bank of AmericaSecret Terms in FSU Contract with Credit Card Giant 

by Terry Smiljanich and Jim Ross

At the same time Florida State University is warning students in a slick video to avoid the “credit card monster,” the university is funneling their names and addresses to credit card giant Bank of America. The bank then uses that information to market credit cards to those very same students, as part of an “exclusive” deal allowing the bank to use FSU’s official colors and symbols. 

Consumer Warning Network has obtained a copy of the contract between the Seminole Boosters, FSU’s athletic fundraising arm, and Bank of America. The deal, which FSU endorsed in a side letter, was supposed to remain confidential.

FSU’s Credit Card Monster Public Service Announcement


Under the secret terms of the agreement, FSU pockets a piece of every dollar charged by students and alumni, with a guarantee of more than $10 million over 7 years. That money goes directly to the private Seminole Boosters which among other things helps pay the multi-million dollar salaries of coaches like Bobby Bowden.

The card marketed to students by Bank of America has less favorable terms, like higher interest rates, than its non-student credit cards.

Students on campus were troubled by their school’s role in the deal. “It’s like they’re setting us up for failure,” said Yari Alpizar, a freshman from Marathon, Florida. “I don’t think they should be allowed to do this. It’s an invasion of privacy.”

FSU is not alone. Bank of America has acknowledged it has arrangements similar to the one with FSU with more than 900 participating schools and colleges. Bank of America would not comment on its contract with FSU or other institutions.  Congress and some State Attorneys General are investigating these relationships between credit card companies and Universities. 

The Exclusive Partnership

In 2002, the Seminole Boosters entered into a partnership with MBNA America, a bank holding company later acquired by Bank of America. Under the deal, the boosters regularly provide mailing lists to the bank. The lists include at least 185,000 names, campus addresses, home addresses, telephone numbers and email addresses of students, alumni, faculty, ticket holders and fans.

That transaction is made with the university’s commitment in the side letter that the Boosters will provide the data exclusively to Bank of America for the marketing of student credit cards. In return, the credit card company obtained the exclusive use of FSU’s “Chief Osceola” logo and colors, an advantage no other credit card company has to make the card more attractive to students.

Under the contract terms, the Boosters are paid “royalties” which are payments for each credit card issued plus a percentage of every retail purchase charged by the student. A customer service representative for Bank of America’s credit card program explained when asked that “an anonymous donation” would be made to Florida State for “every new account that is opened and every purchase made.”

Bank of America has guaranteed at least $10.7 million in payments to the Boosters, which uses the money for FSU’s athletic programs. The Boosters, among other things, supplement the salaries of FSU coaches. They’ve helped to make Head Football Coach Bobby Bowden the highest paid state employee in Florida, at $2.5 million a year.

These so-called “affinity cards” are marketed to both students and alumni. According to Bank of America, 2% of the cards are held by students. Affinity cards, which contain the logos of everything from NASCAR to airlines, are popular with many cardholders.

In an interview with CWN, The President of Seminole Boosters, Andy Miller, acknowledges the marketing program by Bank of America is “couched” in terms indicating it has FSU’s endorsement. Miller defends the arrangement as a way for students “to support the mission of the university… I take the position that a lot of kids are going to take a credit card from somebody. Here’s a way to support your university,” he said.

FSU’s Vice President of Finance and Administration John Carnaghi, who signed the original side letter, says he does not see a problem with the program. He said most universities around the country have similar arrangements. “We’re certainly not going to sell out our students,” he said.

But student Jessica Alvarez, freshman of Orlando says that’s exactly what FSU did. “We have to pay for so much as it is for school and then FSU sells our names to a credit card company. I think that’s wrong,” she said.

The “Credit Card Monster”

Student credit card debt is a growing problem, and one that FSU acknowledges. In 2007, the school partnered with the Student Government Association to produce a video, called “Avoiding the Credit Card Monster,” warning students about the dangers of credit card debt. Clifford Counts, then FSU’s student government Vice President, hosts the video.

Counts told FSU’S Board of Trustees at a May 11, 2007 meeting that student credit card debt is “becoming a serious problem within our generation.” He noted, “…students are graduating with up to $6,000 in credit card debt and around $19,000 in student loans.”

The video lists the “top ten reasons NOT to get a credit card,” including financial debt, high interest rates and temptations to charge and pay later.”

The Student Government Association was so committed to raising awareness about the student credit debt problem that it contributed $5,000 to ensure the video’s production. At the same time in 2007, the Seminole Boosters received more than $1.25 million dollars from Bank of America under its deal for exclusive use of the school’s logos, trademarks and mailing lists.

“It’s hypocrisy,” said Rachel Pyatt, a freshman from Winter Springs. “They’re telling us to avoid credit cards and selling our information. I really think that’s wrong.”

Carnaghi says he does not see a conflict with the University endorsing a credit card while at the same time warning students to “avoid the credit card monster.”

“I think credit is a viable form of currency. If you watch [the video], it does not say don’t use credit cards. We are talking about responsible use,” Carnaghi said.

In a recent report on “The Campus Credit Card Trap,” the Public Interest Research Group (PIRG) found that college students are overwhelmingly opposed to the sale or sharing of student lists with credit card companies. Even so, students are increasingly the target of such marketing campaigns due to partnerships with cooperating universities.

PIRG also revealed several troubling statistics on the student debt problem. College students now graduate with an average of more than $2000 in credit card debt. More than half said they use their cards for day to day expenses. Forty-percent use them for “weekends and pizza.” Twenty-five percent use them for vacations.

Half of students paying their own credit card bills carry a balance on their card, which subjects them to higher interest rates. A quarter of the students surveyed reported having to pay late fees.

The PIRG study says several colleges enter into these exclusive arrangements to
market “college credit cards” in return for lucrative fees. “These arrangements come at the expense of student privacy and pocket books,” says the study.

The PIRG study also describes how schools appear to cover up their actions. “Often these arrangements are disguised through a relationship with an intermediary entity, typically an affiliated alumni association,” says the study.

Disguising the Relationship

FSU shields its relationship from public view by using the arrangement with its private athletic fundraising arm, the Seminole Boosters. In the side agreement executed at the same time as the Booster agreement with Bank of America, the University agreed to guarantee the bank exclusivity.

The deal prohibits any other credit card company from obtaining similar mailing lists and endorsements. The purpose was “to protect the very large commitment MBNA has made to the Boosters.”

FSU’s Carnaghi said $20 million from Bank of America and a previous contract with credit card company First USA was used to build a women’s soccer and softball field complex. Booster President Miller said money from the deals went to FSU’s University Center and the Moore Athletic Facility.

Miller told CWN students are given a chance to opt out of the marketing program. FSU tells students it will disclose their personal data, but that disclosure is buried in the midst of a lengthy “Academic Regulations and Procedures” manual. The manual says their “prior consent is not required” for the release of this student directory information.

Carnaghi said he could not recall if the University provided its students specific notice that it gives names and addresses to a credit card company for marketing. “If they asked, we would have told them,” he said.

There is, however, no clear warning to students that FSU sells names, addresses and other student directory information to Bank of America, student loan companies and telemarketers.

By contrast, the University makes it very clear to the business world that it can buy student information. FSU’ Office of Information Technology explicitly advises private companies how to buy such directory information. These lists are sold to banks, housing service providers, retail establishments and credit card companies.

FSU junior, Phil Flack of Long Meadow, Massachusetts said the school could be causing harm to students, especially incoming freshman “just released from their parents.”

“I pay the university for my education and they’re taking it in their hands to raise money by selling my name to a credit card company. They shouldn’t be selling information. It is private,” he said.

Florida International University, the University of Central Florida, and the University of South Florida did not respond to multiple requests by the Consumer Warning Network for information on their own arrangements with Bank of America.

This is part of a continuing investigation by the Consumer Warning Network.

[Angie Moreschi contributed to this report.]