This study is an in-person survey of a diverse sample of over 1500 students, primarily single undergraduates, at 40 large and small schools and universities in 14 states around the country conducted between October 2007 and February 2008. It analyzes how students pay for their education, how many use and how they use credit cards and, as an important goal of the survey, their attitudes toward credit card marketing on campus and whether or not they support principles to rein in credit card marketing on campus.

The findings confirm that students are using credit cards in significant numbers and that a significant number are paying the price through late fees, high balances and delinquencies. The findings also show that banks are marketing aggressively to students through a variety of channels. Finally, the findings demonstrate that an overwhelmingly majority of students support limits on credit card marketing on campus to rein in unfair bank practices.

Along with asking colleges to adopt fair credit card marketing principles, we're conducting FEESA (sounds like VISA) credit card counter-marketing campaigns on colleges around the nation. We hand out financial education literature and "don't be a sucker" lollipops, not sandwiches, t-shirts, cash-back or iPod Shuffles. And, we don't require a completed application.

Banks seeking more ways to market credit cards to students while pocketing nice commissions (interchange fees) from merchants that accept plastic have a "next frontier:" selling debit card/ID cards to colleges seeking to cut costs as tuition skyrockets. USA Today's Kathy Chu reports today on how Colleges' debit-card deals draw scrutiny:

Far fewer colleges have debit card than credit card alliances, but more are joining the move to ID-debit cards. In 2007, 127 schools had joined with banks to issue ID cards that double as debit cards, a 144% jump from 2002, according to CR80News, an industry publication. A USA TODAY survey of the nation's 15 largest universities by enrollment reveals that more than half now have bank card relationships with financial institutions. In most cases, that means the student ID card doubles as a debit card.

As I point out in the story, the information banks collect from debit card use opens a "gateway" to market ever-more targeted credit card offers to the students. Eric Halperin of the Center for Responsible Lending notes that the students will also be a lucrative market for overdraft fees:

"More so than anyone else, they are willing to use their debit cards for small-dollar transactions," says Eric Halperin, director of the center's Washington office. "When they do overdraft, it can be amazingly expensive."

Finally, Chu includes a story sidebar Cuomo examining pacts between colleges, banks on New York Attorney General Andrew Cuomo's nationwide investigation into "whether college students are being hurt by their schools' partnerships with banks that offer debit and credit cards." For more on our work on campus card marketing, see truthaboutcredit.org.

What if the price you paid for your car loan or mortgage wasn't based on your qualifications, but how big a kickback the broker received? And what if that spread between what you should have paid and what you were forced to pay was even worse if you were black or brown? When do legal commissions become illegal kickbacks? Are improper incentives to brokers and executives material to the foreclosure crisis that's led to the economic crisis? What if you got bad investments because your mutual fund manager was seduced by a party-lifestyle involving luxurious spas and dwarf-tossing contests, paid by brokers? Does a corporate captain who took the lifeboat while his passengers drowned deserve to walk away with millions of dollars?

Here are some recent stories.

Days at Wimbledon. Nights at U2 concerts. Flights aboard the Concorde. And a dwarf to toss.

Chief executives of three financial companies who received outsize pay packages even as their shareholders lost billions in the spreading credit crisis are scheduled to testify before Congress on Friday...

Here's a few more:

In Illinois, Attorney General Lisa Madigan is trying to determine whether Countrywide, the nation's largest mortgage lender, and Wells Fargo, the second-largest lender, put black and Latino borrowers in subprime or other high-cost loans when they could have qualified for a lower-cost loan.

If the subpoenas find evidence of discriminatory lending practices, Ms. Madigan may push lenders to more aggressively modify loans to minority borrowers in financial distress so they can stay in their homes, or seek other monetary remedies in addition to changes in how loans are made, said Deborah Hagan, chief of the Illinois Attorney General's Consumer Protection Division. The investigation might be extended to other lenders, she added.

We wonder if the officials behind this policy have ever tried to repair a bad credit report -- an experience that rivals Dante's "Inferno."

Dr. Michael Hunt, emergency physician at Swedish Medical Center, said he has seen injuries from clamshell packages. Lacerations from using a knife are most common. "People get frustrated and vigorous," he said. "That's when the mishaps occur. People don't appreciate the integrity of the packaging. You become rushed and not slow and considered in your approach."

Whatever the reasons, state lottery officials and the companies they hire to run the games appear to be concentrating on the heaviest players.

Sallie Mae Bids to Raise $2.5 Billion In Stock Sale by David Hilzenrath: The planned stock sale is part of an effort to extricate the company from a financial bind -- another link in a chain reaction of trouble set off by the collapse of negotiations to sell the company and the collapse of its stock price.

Sallie Mae, the troubled student loan giant, said Wednesday that it would raise $2.5 billion by selling stock in the public market and would use most of the money to pay off a disastrous bet that the company made on its common stock price.

The U.S. PIRG Education Fund's new truthaboutcredit.org campaign to get predatory credit card marketing off college campuses is picking up steam, with major stories yesterday in the New York Times (Pushing Colleges to Limit Credit Offers to Students by Charles DelaFuente) and today in the Washington Post. And, we're even getting requests for our FEESA--Free Gifts Now, Huge Fees Later counter-marketing project's cool light blue FEESA logo polo shirts. I don't even have one yet! Here's an excerpt from Washington Post syndicated columnist Michelle Singletary's story The Extra Credit Students Don't Need:

Many schools have signed lucrative affinity deals with credit card companies in which they provide contact lists of students or allow sidewalk-marketing by the credit pushers. It's an insidious relationship. [...] I don't think any college student needs a credit card. If students don't have the money to pay for school supplies, textbooks or food (the top reasons they use credit), what are they going to do when the bill comes due? Oh yes, they'll do what many seasoned cardholders do. They will roll over their balances to the next month and dig themselves deeper into debt.

Campus chapters across the country rolled out the U.S. PIRG Education Fund's (previous blog) new Ford Foundation-funded credit card counter-marketing campaign yesterday. Here's a nice story in the Tucson Citizen by Renee Shafer Horton called Wise credit card use by students urged at UA (University of Arizona) with a great photo of PIRG student Angela Yazzie collecting a petition signature (At right's a thumbnail of the photo by Norma Jean Gargasz) in her light blue FEESA polo shirt. There are numerous other stories explaining the campaign, including an AP story by Justin Pope, Project targets credit cards on campus by Becky Yerak in the Chicago Tribune and the story Colleges urged to rein in credit card companies' activities on campus by LA Times' syndicated personal finance columnist Kathy Kristof. Here's Groups target campus sales tactics in the Michigan Daily by Daniel Strauss. In the Arizona Daily Wildcat, here's Cody Calamaio's story UA students join effort to urge safe credit usage. Clark Kauffmann of the Des Moines Register has been detailing the problem of exclusive credit card marketing contracts at Iowa public universities in an investigative series (previous blog); here's his piece on the campaign launch. More information is available at our campaign website Truthaboutcredit.org.

In yet another editorial, Common Sense and Credit Cards, the New York Times has called for strong actions to rein in sharp credit card company practices that unfairly strip wealth from consumers, including college students.

All too often, these companies sometimes deluge students with cards, even when they have no verifiable income, luring them and sometimes their families into debt.[...]Congress also needs to take a close look at the school-themed credit cards that are often offered by privately run college alumni associations. The associations earn royalties and sometimes share a portion of the money with the colleges, which are then required to promote the cards on campus. These deals resemble the unsavory arrangements under which student loan companies paid kickbacks to colleges in exchange for being placed on so-called "preferred lender" lists.

Clark Kauffman has a followup story to his excellent Des Moines Register piece yesterday on campus credit card marketing. Today's followup story University data deals shroud money shows how the big banks sign contracts with alumni associations, which then sign contracts with the schools, in efforts to keep the details of their relationships secret.

It was a roundabout way of doing things, but it's an approach Bank of America and other credit card companies have used at many U.S. schools. It enables some of the world's largest financial institutions to keep secret the amount of money they pay to use the assets -- and even the student athletes --of public universities.

Over at the Des Moines Register, in a story called U of I, Iowa State use student data to sell credit cards, reporter Clark Kauffman describes in detail the relationship between Bank of America and the state's two largest universities, facilitated by go-between contracts with "private" alumni associations. Kauffman used open-records laws bolstered by a recent Iowa court decision holding that "private" foundations affiliated with "public" universities are themselves subject to open-records laws to pierce the veil of secrecy that has long-surrounded the contracts that govern all aspects of bank relationships with public universities -- sharing of student data, royalties (I call them kickbacks in the story) and details of credit card company marketing arrangements to students on campus.

The story highlights the exclusive campus credit card marketing deals that come with the contracts. While the big early money in these arrangements comes from profits on cards taken up by the vast pool of big-spending and financially-secure alumni involved in the plans, the longterm payoff for the banks is to become the first card in a young person's wallet.

The tawdrier aspects of campus credit card marketing -- and the effects on already-high student debt loads -- are of great concern to U.S. PIRG. With the support of the Ford Foundation, U.S. PIRG and its student PIRG chapters have recently launched a major truthaboutcredit.org project to change the way credit cards are marketed on college campuses. From the Des Moines Register:

Iowa's two largest public universities are aggressively marketing credit cards to their students as part of an arrangement that generates millions of dollars for the schools' privately run alumni organizations.[...] At the same time, however, the two schools have signed deals with their alumni associations in which they have agreed to endorse, promote and profit from Bank of America credit cards marketed directly to students.

Not all the giveaways are school-sponsored. Last week, the Ohio attorney general sued Citibank after fast-food restaurants distributed fliers at Ohio State University, offering students free burritos and sandwiches. What the restaurants failed to advertise was that the students needed to complete an application for a Citibank credit card to get the free food.

Interesting blog item from Mary Pilon over at FiLife, Getting Chased by Puppies. At NYU, Chase on-campus credit card marketers are apparently luring students to their table with a puppy dog.

Today the House followed the Senate in passing strong student loan reform legislation (New York Times story). PIRG students were active in efforts to pass the bill. In the photo, left, ConnPIRG's Trea McPherson speaks on behalf of students nationwide at a news conference with champion and Senator Ted Kennedy (D-MA). In the photo below, Senator Kennedy talks with Andrew Friedson (Student Government Association president at University of Maryland College Park) and Trey. Here is an excerpt from PIRG Higher Education advocate Luke Swarthout's statement:

The College Cost Reduction and Access Act is the most meaningful higher education reform in more than 15 years. The legislation addresses the dual financial challenges of access and affordability that face American college students. The legislation provides billions of dollars a year in additional grant aid to low-income students through the Pell Grant program. It will also help students address the burden of rising student debt through lower interest rates and a new repayment system.

For Immediate Release: September 7, 2007
For More Information: Luke Swarthout, U.S. PIRG Higher Education Advocate, 202-546-9707

Congress Passes Major Higher Education Reform

Today the U.S. Senate and House of Representatives passed the College Cost Reduction and Access Act by votes of 79 to 12 and 292 to 97 respectively. The bill now goes to the President who has said he will sign the legislation into law.

Statement by U.S. PIRG Higher Education Advocate Luke Swarthout:
"The College Cost Reduction and Access Act is the most meaningful higher education reform in more than 15 years. The legislation addresses the dual financial challenges of access and affordability that face American college students. The legislation provides billions of dollars a year in additional grant aid to low-income students through the Pell Grant program. It will also help students address the burden of rising student debt through lower interest rates and a new repayment system.

This legislation is an example of Congress getting policy making right. The bill trims excessive subsidies that benefit a handful of banks and directs them to millions of students and families who are working to pay for college. The bipartisan votes for this legislation, and the President’s pledge to sign it into law, are testament to the broad support for helping students and families pay for college."

The College Cost Reduction and Access Act will:

Increase the maximum Pell Grant award by $490 for each of the next two school years, by $690 for the following two school years and by $1,090 for each following year. The Pell Grant is the nation’s premier college access program, providing grants to 5 million low-income students each year. The maximum Pell Grant is currently $4,310.

Create an Income Based Repayment program that allows borrowers to repay their loans as percentage of their income. Borrowers would be expected to pay 15% of any income above 150% of the poverty line (about $15,000 for a single individual). This new program will protect borrowers with low salaries having to make unmanageable payments. As a result students will be able to make employment and life decisions based on their values rather than the volume of their debt.

Reduce interest rates on student loans for more than 5 million low and middle-income student borrowers receiving subsidized Stafford loans. To see how many students would benefit from these interest rate reductions read U.S. PIRG’s report , "Cutting Interest Rates, Lowering Student Debt" . (Note: this report does not describe the interest rate reduction used in the final College Cost Reduction Act)

Finance increased education spending by reducing subsidies to student lenders. Lenders will receive a reduced rate of return for offering federal student loans and a slightly reduced reinsurance rate from the federal government. As a result, the increased grant aid and loan benefits will have no additional cost to taxpayers.

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U.S. PIRG is the federation of state Public Interest Research Groups. State PIRGs are non-profit, non-partisan public interest advocacy organizations. The U.S. PIRG Higher Education Project was established in 1994 to secure more aid for students, with a focus on additional grants, reduced debt, and better service to students in the federal financial aid system.

When everyone with good credit has too many credit cards already, banks eager to increase profits in the already extremely lucrative credit card business have three choices:

College students and immigrants are favorite targets as new customers. Previous bankrupts are also targeted, because they have what's been called "a taste" for credit. Today's New York Times editorial The College Credit Scam cautions against the most aggressive and unfair practices that the card companies use on campus:

Colleges, which often allow solicitation on campus, need to do more to protect their students from taking on credit card debt that can severely damage their economic prospects once they graduate from school and join the world of work.

Senator Ted Kennedy (D-MA), Chairman of the Senate HELP Committee, has released a comprehensive report describing the seduction of the nation's student loan officials by lenders who plied them with gifts and favors in return for special treatment. What about the students? They got higher loan rates. The report documents that for at least one disgraced (and recently fired) official at the University of Texas, loan "pricing was the least important of factors." Instead, as an email from Bank of America states, UT's Lawrence Burt's demands were more in the line of "... lunch and/or dinner with Lawrence Burt, parties for Lawrence's family (birthdays, etc.)...tequila and wine.'" Of course, "candy bars, popcorn, happy hours, birthday cakes, cookies" were just the door-openers. The report goes on to detail the sham consulting arrangements and bogus advisory boards resulting in kickbacks of thousands of dollars to key officials such as Burt and Ellen Frishberg of Johns Hopkins and, of course, the junkets to "Atlantis hotel in the Bahamas...and another in Las Vegas at the Venetian Resort Hotel Casino" and Disney World and other points of presumed educational interest.

Frishberg was by most accounts -- including personal communications from student advocates to me -- once one of the better supporters of students in the administrator community, but as Amit Paley of the Washington Post reports today, she:

is the focus of a criminal and civil investigation by [New York Attorney General Andrew] Cuomo's office. The review could result in charges of fraud, bribery, conspiracy or all three, according to people with knowledge of the matter who spoke on condition of anonymity because the investigation is ongoing.

Luke's testimony details how the over-priced private loan (at federally guaranteed to the lender rates) products that the banks seduce these administrators with fail both the nation's students and the nation's goals of helping lower-income students achieve the American dream:

Private student loans work exactly counter to meeting the goals of our federal student aid system: The grant and loan programs were created to help, in particular, low income students who were trying to use higher education to gain access to the middle class. First generation students who were paying their own way through college are the inspiration for our Pell Grant and Stafford Loan programs. Over the past 20 years we have done these students a disservice by shifting federal aid from a majority grant system to a majority loan system. A system with so much unmet need that low- and moderate income are turning to private loans, where those with the least resources are given the highest interest rates, is a particularly cruel abandonment of Congress's original higher education principles.[...]The student lending industry has increasingly marketed private loans to students at sub-prime terms.

My PIRG colleague and higher education expert Luke Swarthout is testifying Wednesday at a U.S. Senate Banking Committee hearing on student loans. He's got a column -- Skimming The Student Loan Cream -- up on tompaine.com today. Excerpt:

At the heart of Sallie Mae's campaign is the simple claim that they earn only half a penny per year on every dollar they lend. Let's pretend for a minute that they are actually representing their profit, and ignore the fact that they were the second most profitable Fortune 500 Company in 2005. What does half a penny really mean in the world of student loan finance? In 2006 Sallie Mae held approximately 100 billion dollars in federal student loans. These loans are virtually risk-free and earn a guaranteed rate of return through federal subsidies. Taking the company's claim about profit at face value, they earn approximately half a billion dollars a year just in interest from their federal loan business. While few people would bend down to pick up half a penny, most Americans, and most American companies, would drop to the ground for half a billion dollars a year in risk-free profit.

Latest from the student loan scandal firehose: In Fortune Magazine, Bethany McLean outlines powerhouse Sallie Mae's latest "unpleasant" efforts to block PIRG-backed reforms that will cut subsidies to lenders and help make college more affordable. From McLean's Fortune story Saving Sallie:

"And right now, Sallie's lobbying involves a particularly unpleasant form of racial politics.[...]Sallie has been reaching out to members of the Congressional Black Caucus, implying that a decrease in its subsidies will mean that the company will be forced to cut back on loans to students who attend historically black colleges and universities."

You feel like you're drinking from a fire hose if you try to keep up with the latest on the burgeoning student loan scandal. Here's a few items from today's news blotter:

The Bush administration killed a proposal to clamp down on the student loan industry six years ago following allegations that companies sought to shower universities with financial favors to help generate business, according to documents and interviews with government officials.

Today's Washington Post story by Jeff Birnbaum, Fighting on Two Fronts, is a good summary of some of the controversy swirling around the extremely profitable student loan industry. A few more links to some of Birnbaum's references:

Establishment of so-called "preferred lender" lists without disclosing the basis for selection or the specific benefits associated with these preferred lenders; revenue sharing and other financial arrangements between schools and lenders; denials or impediments to a student or parent's choice of lender based on the borrower's selection of a particular lender or guaranty agency; impediments to competition in the lending industry that stifle better loan terms for students and parents.

their relationships with colleges financial aid offices. Recent news reports have revealed that some private lenders offer gifts or other questionable incentives to colleges that agree to encourage students to take out their education loans with those specific lenders.

We've set up a new site over at StudentPIRGs.org to collect complaints (or praises) from college students and other young people about their interactions with credit card companies.

Carrying a credit card is practically a necessity these days for young adults. One-quarter of students report using credit cards to pay for the cost of books and tuition. Students should get the credit they deserve, but they pay more than they bargained for. Irresponsible credit card companies pile the debt on young adults.

[UPDATE, same day: Links to AG Cuomo's release, a bizjournals.com story and an AG office brochure for college-bound high school students applying for loans.]

Attorney General Andrew Cuomo of New York is investigating the seamy relationships between student loan lenders and schools. The deals being cut may benefit the schools, and the lenders, at the expense of students. According to Jonathan Glater's story Lenders Pay Universities to Influence Loan Choice in Friday's New York Times:

Dozens of colleges and universities across the country have accepted a variety of financial incentives from student loan companies to steer student business their way, Attorney General Andrew M. Cuomo of New York announced yesterday. [...] Last year, students took out more than $85 billion in federal and private loans to pay for higher education. Mr. Cuomo began looking into incentives because many financial aid offices compile lists of "preferred" lenders, sometimes as few as two, and students rely on those lists rather than comparison shopping. Mr. Cuomo said he was still investigating at least 100 schools.

The PIRG-backed proposal to cut student loan rates in half is up Wednesday on the House floor as part of the House 100 Hours plan. This month, PIRG Higher Education Advocate Luke Swarthout released Cutting Interest Rates In Half, a report showing that the measure would save the average working and middle class borrower $4,420 over the life of his or her loans. Stories today: Christian Science Monitor's Amanda Paulson, Congress Moves to Cut Student Loan Costs and the AP: Democrats Aim To Cut Student Loan Interest.

PIRG Higher Education Project Advocate Luke Swarthout has a new report out today: Cutting Interest Rates in Half Would Save Working and Middle Class Students Thousands of Dollars in Debt. The report documents the benefits that the First 100 Hours proposal from Speaker Pelosi (D-CA) and others will provide:

Cutting student loan interest rates in half will save the average working- and middle class borrower $4,420 over the life of their loans...The Congressional proposal would lower interest rates on undergraduate subsidized Stafford loans over the next five years until they are cut in half to 3.4% starting in 2011. In 2004-2005 more than five and a half million students took out subsidized Stafford loans to pay for college. "Over the past decade we have asked America's college students to shoulder a heavy burden of debt to pay for college," said Swarthout. "Cutting interest rates on student loans will help millions of working and middle-class students and their families by saving them thousands of dollars in student loan payments."

The Department of Education is considering placing needed limits on the collection fees -- ranging up to 66% more than the amount owed -- some colleges charge former students for unpaid student loans. Read a transcript of or listen to a Marketplace Radio interview today with PIRG Higher Education Project's Luke Swarthout. Excerpt:

Under federal law Universities determine the penalties on defaulted loans, so long as those fees are "reasonable." But Swarthout says that's where the rub is.

SWARTHOUT: A student who already has a challenge repaying a $10,000 loan is going to have an even greater challenge repaying $16,000 in debt if you tack on a 60 percent collection fee.

Universities say they need to recoup those costs in order to fund new student loans. The Department of Education's proposal would likely cap fees closer to the 16 percent average for student loans administered by the government.

In a story MasterCard Europe to Reduce Debit-Card Fees Amid EU Probe, the Wall Street Journal (pd. subs. requ.) reports today that Mastercard will be cutting fees it charges merchants on debit card transactions dramatically -- in hopes of staving off further regulatory scrutiny.

One of the biggest of the big lies is when the banks tell us that they don't make any money on consumers who pay off their credit cards each month. Actually, they do. They take a hefty cut of every merchant credit or debit transaction. All customers, cash or plastic, pay higher costs for goods to offset these fees. A series of lawsuits in the U.S. has questioned whether the way the bank associations (Visa and Mastercard) set these fees for both credit and debit card interchange violates the antitrust laws and has helped reduce the excess profits they've been making on these merchant interchange fees. Here's recent PIRG Congressional testimony. The WSJ reports fees will go down up to 60%. From the WSJ:

MasterCard Europe said its new fee structure would take effect in January 2008. The new fee for a Euro50, or about $67, transaction paid with a Maestro debit card would be between nine European cents and 20 European cents (12 cents to 27 cents), down from the current 25 European cents to 59 European cents, it said.

Along with other PIRG consumer staff, I will be attending the National Consumer Law Center's Consumer Rights Litigation Conference in Miami over the weekend. It's an exciting event for anyone who cares about access to justice. All the consumer top guns on predatory lending, credit bureaus, identity theft, debt collection law and similar topics should be there.

The maketextbooksaffordable.com campaign run by the Student PIRGs has a new report: Required Reading: A Look at the Worst Publishing Tactics at Work. Previous studies by the successful campaign have shown that textbooks are a growing cost of going to college. Among those reports' other findings is that the textbook industry is using a host of practices that drive up the price of college textbooks. Required Reading takes a look at some of the worst practices and then makes policy recommendations. Among the worst practices:

In today's Wall Street Journal, Jaime Levy Pessin has a followup story, Concern Over Brokers at Banks, (pd subs. req.) to last week's announcement by NASD that it had fined a bank-owned brokerage $850,000 for a number of alleged violations of the securities laws in its marketing of uninsured investment products (ranging from pitches for 529 college savings plans to investments for senior citizens), although the terms of the settlement, as they often do, required no admission of guilt. From the WSJ:

Do bank customers know the difference between keeping their money under a mattress and taking it on a roller-coaster ride? The National Association of Securities Dealers, the brokerage industry's self-regulatory group, is worried that brokers based in bank branches aren't doing a good enough job of telling customers that their investments, unlike bank deposits, carry risks of loss.

NASD imposed the penalty on CCO Investment Services, a subsidiary of Citizens Bank of Rhode Island. You may never have heard of this bank, nor of CCO, but it is part of the global financial consolidation trend:

"Owned by RBS, The Royal Bank of Scotland Group plc, we now have branches in 13 states, including Connecticut, Delaware, Illinois, Indiana, Massachusetts, Michigan, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Vermont and Rhode Island. We also have non-branch offices in more than 40 states."

"Like any securities firm, bank-affiliated broker-dealers must have adequate supervisory systems and controls for ensuring compliance with regulatory requirements...This bank-affiliated firm missed the mark with regard to several important requirements, including some that impacted retirees - an especially vulnerable group for whom NASD rules, the federal securities laws, and the telemarketing laws provide valuable protections."

The WSJ story goes on to point that as more bank lobbies become one-stop financial shopping centers, with a teller area for insured deposits but agents for affiliates camped in the lobby hawking stocks, that the lines may be too blurry (and perhaps intentionally) for consumers to understand:

The issue is becoming a bigger concern as the financial-services industry consolidates and firms increasingly try to sell brokerage products to their bank customers...When customers of a bank have safe bank products that mature, "they might be steered in the direction of an affiliate and sold products that may or may not be suitable," says Emily Gordy, the NASD's vice president of enforcement. The group has several open investigations of bank-affiliated broker-dealers, and is also looking into whether brokers who are based in banks are adequately trained and supervised.

The WSJ story suggests this NASD action against one bank-broker may only be the first of many actions. With the demise of traditional pensions and the rapidly growing number of consumer-investors, it's good that NASD is acting as an aggressive cop on the white-collar crime beat.

Unfortunately, it's bad that just a few years after the 1999 Act, banks are already seeing how much they can get away with. One of the scandals that drove passage of the limited consumer protections included in the 1999 act appears eerily similar to some major aspects of what NASD was dealing with here: In 1998, NationsBank (predecessor to Bank of America) was fined $7 million for securities law violations. It shared information about bank customers with its affiliate, NationsSecurities. The affiliate convinced low-risk customers (senior citizens with Certificates of Deposit (CDs), no less) to buy uninsured, very high-risk and complex hedge-fund-like investments. Many senior citizens lost portions of their life savings.

This SEC decision will give you the grimy details. But here's a tease:

NationsBank failed to implement adequate measures to avoid the potential for customer confusion inherent in the operation of a broker-dealer on the premises of a bank. Some employees of NationsBank and NationsSecurities engaged in marketing and sales practices that blurred the distinction between the bank and the broker-dealer and their respective products. The combination of improper sales practices and practices that blurred the distinction between the bank and the broker dealer and their respective products culminated in unsuitable purchases by investors...On a number of occasions, the Sales Manager held up a picture of the Term Trust 2003 brochure which contained a picture of the U.S. Capitol Building on it, and said that NationsBank stated that "if the Capitol is standing in 10 years, these people [investors] will get their money back." Some of the registered representatives were also told that the Term Trusts were as safe as CDs or were "guaranteed" to return an investor's $10 share price at the end of the ten year term.

Check out this blog entry by our higher education advocate Luke Swarthout on today's New York Times story by Jonathan Glater called Offering Perks, Lenders Court Colleges' Favor. It's about influence peddling by some student loan giants -- not (this time, anyway) to the Congress, but to college financial aid administrators. Excerpt from Luke's post:

It is impossible to know exactly whether a Caribbean vacation will result in Loan to Learn being added to any particular lender list, just like there's now way to know for sure that Jack Abramoff flying politicians to Ireland for golf outings influenced their particular votes. That's why we should set a higher standard for administrators and politicians alike-no expensive vacations, trips, fancy dinners.

You should check out the Generation Debt blog by author Anya Kamenetz anyway, but while she's traveling for a few months, her guest blogger is Luke Swarthout, my U.S. PIRG colleague and expert on higher education costs. Here's Luke's main project page: Studentdebtalert.org.

In the International Herald Tribune, Holly Hubbard Preston compares the skyrocketing costs of a U.S. college education with costs in other countries. While the article, which uses statistics from the Student PIRG Studentdebetalert.org campaign, notes cost increases around the globe, it also shows that other nations are seeking solutions before their problems get as bad as the problems faced by U.S. graduates:

Politicians are becoming concerned that if the specter of debt leads young people to view higher education as a luxury not worth pursuing, their nations' competitiveness will suffer.

[Update: fixed url, 2/07] The Wall Street Journal reports today in Costly Textbooks Draw Scrutiny of Lawmakers (pd. reg. req.) that state and federal lawmakers are taking notice of the Student PIRG Maketextbooksaffordable.com campaign to lower skyrocketing textbook prices, which have risen at twice the rate of inflation, according to the GAO. From the WSJ:

Virginia and Washington have enacted laws designed to make textbooks more affordable, and lawmakers have introduced similar bills in 10 other states.

In the New York Times, a recent story The Bank of Mom and Dad by Anna Bahney (free reg. req.) reports on 23-year-old Jason McGuinness and other young recent grads burdened by college loan debts and "flatlined paychecks:"

And like many of his peers -- educated, employed, urban-dwelling young adults -- he [Jason] receives monthly assistance from his parents, in the form of a $300 check and the payment of his cellphone bill.

Here's our release condemning last week's vote to cut student loan funding by over $12 billion. We've called for a veto. Says PIRG Higher Education associate Luke Swarthout: "These cuts will pay for tax cuts for some of the wealthiest Americans." More PIRG info on higher education and student loans is here.

Later this morning, the House of Representatives will vote on approximately $12 billion in cuts to the student loan programs. 70% of the total cuts come from students and families at a time when college costs continue to rise and support for grant aid has slackened across the country. Click "continue" to read our release:

FOR IMMEDIATE RELEASE: February 1, 2006
FOR MORE INFORMATION: Luke Swarthout (202) 546-9707

House to Vote this Morning on Largest Cut to Student Loan Programs in History
Statement of Luke Swarthout, Higher Education Associate

"Later this morning, the House of Representatives will vote on approximately $12 billion in cuts to the student loan programs. 70% of the total cuts come from students and families at a time when college costs continue to rise and support for grant aid has slackened across the country. Congress should commit