Credit card issuers paid $83 million to colleges, alumni groups, fraternities and sororities in 2009, and the University of Illinois Alumni Association received the biggest payment, according to a new Federal Reserve report.
The U.S. credit card act passed in 2009 requires credit card companies to submit to the Fed annually a copy of any agreement between the issuer and the college and alumni group, including how much they pay for the right to market their cards.
“Issuers are willing to pay these figures in return for valuable information from colleges and alumni associations, which could include phone numbers, email addresses and physical addresses of members,” said Bill Hardekopf, chief executive of Lowcards.com. “The agreement usually comes with a right to market cards to them a specified number of times.”
Of the 10 biggest agreements by payments by credit card issuers in 2009, the University of Illinois Alumni Association topped the list, paid nearly $3.3 million. Second and third, respectively, were the Penn State Alumni Association, which received $2.8 million, and the University of Notre Dame du Lac, which received nearly $1.9 million, the report said.
According to the 31-page report, payments to other Illinois parties included $40,000 to the Alpha Phi International Fraternity in Evanston; $994 to Aurora University in Aurora, $428,572 to Northwestern University in Evanston, and $300,000 to the University of Chicago.
“This first report underscores how important the college market and alumni associations are to credit card issuers,” Hardekopf said. “This is also very significant money for colleges at a time when these institutions are scrambling to raise money any way they can.”
Under the new credit card act, credit card issuers can no longer offer incentives or giveaways to encourage card applications on college campuses, he said.
It also prevents anyone younger than 21 from getting a credit card without proof of ability to pay or an adult co-signer.
FIA Card Services, which the Fed said is a unit of Bank of America Corp., has the deal with Illinois, which resulted in 330 accounts being opened in 2009, the report said.
To see the Fed’s press release, its entire report, and a new online database, click here.
