Senate panel condemns student-loan tactics

Financial services companies seeking to be listed as preferred lenders have tempted college officials with free travel, happy hours, sports tickets and paid consulting jobs, according to an investigative report by U.S. Sen. Edward Kennedy, D-Mass., chair of the Senate health and education committee.
“Inappropriate marketing practices, conflicts of interest and back-room deals are found all too frequently in the [$85 billion] study loan industry,” Kennedy said on the panel’s Web site. The problem cannot be isolated to a few problem lenders, his staff added.
Providence-based Citizens Financial Group Inc., which named college and lending officials to advisory boards it used as “marketing tools to expand market share at board members’ schools,” the report said, according to Bloomberg News. It said Citizens paid for a $41,645 trip to Disney World last year and a $43,000 trip to Sanctuary Resort in Phoenix in 2005.
Citizens stopped the trips this year and now conducts meetings via teleconferencing, the bank said in an e-mailed statement. “Board members are not paid, nor have they ever been,” Citizens added.
Other lenders regularly gave tequila, wine, happy hours and sports tickets to financial aid officers at the University of Texas, according to an e-mail message cited in the report, sent by a Bank of America Corp. employee who refused to provide similar perks. “He was being asked to do things that he knew he shouldn’t do, and he did the right thing,” bank spokesman Lawrence Di Rita told Bloomberg News.
Citigroup Inc.’s student-loan unit paid for golf outings and expensive meals for an advisory committee whose members included the University of Texas student-aid director and paid $16,000 for student receptions at Chaminade University of Honolulu, the report said, while JPMorgan Chase & Co.’s student-loan unit spent more than $400,000 on marketing in 2005, including tickets for Cleveland Indians baseball games. Most of that went to raise the company’s visibility with students, said JPMorgan spokesman Tom Kelly. But, he added, the baseball tickets probably were used for entertaining financial aid officers, which would be forbidden under the lender’s new code of conduct.

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