Predator banks run bogus college advice sites to collect student data
Banks and credit card companies seem to make their own rules when it comes to charging extra fees to consumers. Columnist David Lazarus reports in the San Francisco Chronicle on a scheme targeting college students who are getting their first credit cards.
When Foster City resident Harvey Silverman began shopping for his son's first credit card, he picked 1st Financial Bank USA, a South Dakota company that specializes in issuing plastic to college students. The card came with no annual fee and provided only a modest credit limit of $250.
The problem arose when Silverman's son, Ross, was hospitalized and his roomate forgot to pay his credit card bill. 1st Financial charges a hefty $9 fee for any payment made online or by phone. If you include a service rep, the fee jumps to $12. Of course that's better than the $37 late fee. So Silverman paid the bill online, only to find out that when the site says it will post "the next business day," it means, according to a bank rep, "the next business day after a business day." So the Silvermans picked up the late fee and the online charge.
"This is absurd," Silverman said. "Students spend most of their time online. This just takes advantage of them."
And the plot thickens. After some investigation, Lazarus found out that at 1st Financial, one has to be invited to own one of their cards and you can't access their website or their lending terms unless you have a special code. 1st Financial said that they mail out thousands of invitations to college students by buying names and addresses of students from "companies that get them from the colleges." That is, colleges are participating in the financial troubles of their students.
1st Financial also runs a Web site called CollegeData, which provides high school seniors with extensive information about how to apply for college. To register for the site, a students is asked to provide key information that credit card companies would want to know. Linda Sherry, a spokeswoman for San Francisco's Consumer Action, says college students should be wary of this connection.
"These are two businesses you wouldn't necessarily want to be linked," she said. "One collects data from young people. The other issues credit cards to young people," said Sherry."This appears to be a rich cross-marketing opportunity for the bank," Sherry added. "It's kind of like the fox guarding the hen house as far as all this data on young people goes."