Many college and university alumni associations have affinity credit card programs that give graduates the option of using a credit card bearing the name and logo of their alma mater. To offer an affinity card, the alumni association engages in a contractual agreement with a bank that gives the bank the right to market the card to individuals who have a close relationship with an institution, such as alumni. A number of not-for-profit organizations, including AARP and the American Bar Association, offer affinity cards.

First and foremost, they strengthen their relationships with alumni by offering them a valuable service. In addition, banks usually pay the association a "royalty" fee for use of the institution's name and logo. Some associations also receive financial benefits when individuals use the affinity credit cards. The financial benefits provide resources the institution would not otherwise have to offer alumni programs, provide scholarships or serve graduates or students in other ways.

Yes. The opportunity to support the institution or its alumni association is one of the primary reasons graduates select and use affinity cards over other credit cards. Graduates also use the cards to demonstrate their pride in their alma maters.

There is nothing inherently wrong with alumni associations' affinity credit card programs, which are similar to affinity card programs offered by many other nonprofit organizations, and there has been no evidence of related impropriety. In fact, these programs benefit graduates, associations and institutions by generating resources that otherwise would not be available to serve alumni and sometimes students.

Recent controversies regarding the relationship between student financial aid offices and "preferred" private lenders have led lawmakers and regulators to examine other relationships between colleges and universities and the companies that do business with their institutions.

Government officials want to make sure that colleges and universities are not engaged in questionable practices or potential conflicts of interest.

Policymakers are also concerned about the level of student credit card debt and whether colleges are encouraging students to take on more debt than necessary through their affinity credit card programs.

It varies. Some associations do not promote affinity credit cards to students. Some market to students and also provide them with credit education programs. Some do not actively market affinity credit cards to students but do not turn interested students away. Regardless, most associations focus their affinity programs on graduates rather than current students.

There are a number of very important differences. The preferred lender issue usually involved entering college students, often unfamiliar with their options for student loans. According to media reports, the preferred lenders may have been presented as or perceived as the "best deal" for the student. In some instances, preferred lenders represented themselves or were perceived as university employees. In contrast and by all reports, alumni associations allow banks to simply share information about affinity credit card programs with alumni, who can then compare affinity card options with other cards and make an informed choice.

The Credit Card Accountability Responsibility and Disclosure Act of 2009 (H.R. 627), which Congress passed and President Obama signed into law in May 2009, includes disclosure requirements for college, university and alumni association credit card agreements.

The disclosure language requires institutions of higher education to "publicly disclose any contract or other agreement made with a card issuer or creditor for the purpose of marketing a credit card." This means that alumni associations housed within colleges and universities will now have to disclose all affinity credit card marketing agreements.

In addition, the law also affects the affinity credit card agreements of alumni associations that are completely separate from their institutions. Specifically, the law requires credit card companies to disclose any marketing agreements with institutions of higher education, alumni associations and affiliated foundations under which credit cards are issued to college students. This means that any card agreement where a student has been issued a card would be subject to disclosure by the credit card company. Read the section of the law that affects alumni association affinity credit card programs (PDF).

Questions about affinity programs from legislators and others provide institutions and associations with opportunities to increase understanding about the benefits affinity programs bring to graduates, students, associations, and educational institutions. Indeed, the revenues generated through these programs can free up other resources at the university to enhance educational access and other priorities. However, many associations are concerned about the potential negative impact to alumni, associations and others if these programs are unnecessarily and unduly restricted.

First, with encouragement from their professional associations, they are reviewing all of their affinity programs to be sure they continue to operate in a manner consistent with professional standards, institutional policies and the mission of the association. They are also working hard to ensure that alumni who participate in affinity programs understand clearly the relationship between the association and the service provider. And they are trying to inform their members, government officials and the public at large about the value of affinity programs and about the harm that could be done by over-regulating programs that have benefited their institutions for many decades.