Huntington Bank exceeds $125M Ohio State contract promises as federal government seeks deal transparency
Ohio State and Huntington Bank officials both tout the success of their multimillion dollar agreement, which has provided some undeniable benefits like student internships and branding opportunities.
But while OSU isn’t outright telling students where to bank, its partnership with Huntington in some ways seems like a strong suggestion – one that comes in a time when the federal government is making moves to seek more transparency from such arrangements.
After an initial multimillion dollar cash payment to the university and the promise of additional benefits, Huntington has been designated the “official consumer bank” of OSU. In return, the university is contracted to provide the bank with some extra perks.
Some said the deal is an attempt to keep tuition low and is therefore well-intentioned, though a federal bureau announced Tuesday it will be asking financial institutions to publicly disclose partnership contracts with higher education institutions in an attempt to help students make better informed decisions about debit cards and checking accounts.
OSU signed its 15-year contract with Columbus-based Huntington Feb. 12, 2012. Huntington paid an initial $25 million to OSU – to go toward “scholarships, education and alumni giving,” according to its website – and promised to supply an additional $100 million in loans and investments for OSU to work on improving the university district area.
The overall costs and benefits of the agreement, though, don’t stop there.
The perks of partnership
In terms of investment, Huntington agreed to make $75 million available in loans and invest $25 million for OSU’s work on revitalizing the university area.
In February, marking the end of the partnership’s first year, the bank gave an additional $1 million to OSU for academic programming and scholarships, OSU assistant vice president of media and public relations Gayle Saunders said in an email.
David Schamer, director of not-for-profit banking at Huntington, said the additional money was provided “based on the success of our first year of the partnership,” in a statement emailed to The Lantern Dec. 6 from Maureen Brown, the senior vice president and director of public relations for Huntington.
Huntington exceeded some of the other contract details as well – although the contract said the bank would provide at least 20 paid internships to OSU students per year, so far the bank has hired 71 interns in the first two years of the contract.
The Huntington funds have gone to a few different offices and associations at OSU, including the Alumni Association, the Office of Academic Affairs and the Office of Student Life.
Saunders said the Alumni Association’s share has mostly been placed into an endowment to “provide long-term funding for enhanced alumni programming and engagement.”
She added that some of the money was used to launch the Office of Alumni Career Management, while some was used to help construct and renovate the Archie & Bonita Griffin Pavilion at the Longaberger Alumni House. The pavilion will be used as a “site of alumni engagement at the alumni house for years to come and is made possible from a variety of revenue sources, including the Huntington National Bank affinity revenue share,” Saunders said.
The Office of Academic Affairs, meanwhile, received funds through its Physical Environment and Technology Enhancement Fund. The money is to be used for renovating and redesigning classrooms and making rooms more technology-friendly, Saunders said.
The fund was established in June 2012 and is worth $10 million, according to OSU Board of Trustees minutes.
The Office of Student Life received $150,000 for the OSU Suicide Prevention program to “continue operations,” Saunders said. The money was given to the Suicide Prevention program – which was close to losing its funding when a $100,000 grant that previously funded the program expired at the end of the 2012-13 academic year – in February. The funds are set to allow the program to continue at least through the 2013-14 academic year.
Student Life has also used Huntington funds to “support and grow financial literacy efforts on Ohio State’s campuses,” Saunders said.
Saunders said Student Life uses other money from the Huntington contract to fund its student wellness ambassadors and coaches. The wellness ambassadors lead outreach events each week that look at different wellness topics such as nutrition and alcohol awareness, while coaches work with students to teach them ways to maximize their personal and professional potential.
Aside from monetary benefits, the Huntington contract allows university-issued BuckID cards to be used as debit cards. Those with BuckIDs have the option of electing into the service.
Information about that part of the contract, however, was redacted because bank representatives believed it, among other contract sections, contained “certain proprietary and/or trade secret information,” according to the contract.
Paul Rose, business law expert and associate professor at OSU’s Moritz College of Law, said there are a few reasons information like that can be considered trade secret.
“Legal departments tend to be risk-averse and they tend to not want to give out any information that could be beneficial to competitors,” Rose said in a Dec. 2 interview with The Lantern.
The benefits OSU sees from the partnership aren’t necessarily without their own costs. A study about campus debit cards from U.S. PIRG – a public interest research group that aims to counter “the influence of big banks, insurers, chemical manufacturers and other powerful special interests,” according to its website – said oftentimes large financial incentives “at least create the appearance of a conflict of interest.”
The study said contracts should be made public so “the public knows that the school chose the debit card program that gives students the best deal rather than the one that gave the college the most money.”
OSU considered offers from other banks, but Saunders did not disclose which banks or the amounts of the other offers.
“Huntington is a hometown partner and has been a long-time supporter of the Ohio State University. While we did have offers from other banks and/or financial institutions, Huntington’s financial commitment to supporting the academic mission of the university exceeded the others,” Saunders said.
Ohio State’s side of the deal
The university was required by the contract to install a “‘way-finding/directory’ signage” system around each OSU campus to “assist visitors in locating the individual branch locations.” OSU installed 17 exterior signs for pedestrians, as well as about 50 other signs of varying size and prominence, Saunders said.
The cost of installing those signs was not made available.
Huntington was promised official invitations and tickets to all Wexner Medical Center expansion activities, including “access to formal events (galas) and ribbon cuttings,” as well as rights to 12 tee-times annually at the OSU Scarlet Golf Course.
In addition, the bank is given 50 tickets each to four men’s hockey games, four women’s basketball games, four men’s baseball games and four women’s volleyball games.
There are also obligations for specific OSU figures outlined in the contract – former OSU football player and Alumni Association President and CEO Archie Griffin, then-OSU President E. Gordon Gee, OSU mascot Brutus Buckeye and the OSU Marching Band are all required to make appearances at to-be-determined Huntington events.
After Gee’s retirement July 1, though, the mandatory presidential appearances were no longer applicable, as “the agreement outlines events that were specific to Dr. Gee. There is no stipulation for interim or future presidents to participate,” Saunders said.
Schamer said the reasoning behind those appearances is to support certain events.
“Both parties foresaw certain events that could benefit from appearances by OSU’s president and band/Brutus as well as Huntington executives, including, as an example, the grand opening of our Tuttle Park Place and 11th/Neil branches in February 2013, where the band and Brutus showed up to help us celebrate by playing some fight songs,” Schamer said.
OSU Marching Band director Jon Waters did not respond to emails sent over the last two months requesting comment about the mandatory appearances.
Schamer was unable to release specific numbers about whether the number of OSU students, staff, faculty and alumni banking with Huntington has changed, but said the enrollment numbers “have surpassed expectations.”
Schamer also said it is not Huntington’s policy to release information about how much money it has made from a contract. He added, though, the contract provides an opportunity for Huntington to reach a broad range of customers.
“For Huntington, like any bank, we want to grow our customer base in our footprint,” Schamer said.
How other local banks are handling it
If OSU should decide to pursue a university-wide banking affiliation or program, it is required to give Huntington notice and allow the bank to vie for the position.
Saunders did not provide information about what an affiliation would look like compared to a partnership.
While the contract allowed 19 other existing real-estate agreements with Fifth Third Bank (11), Chase (2), Credit Union of Ohio (1) and U.S. Bank (5) to keep their existing branches and ATMs on OSU’s campus, Huntington committed to replacing the ATMs as the spots become available.
Minneapolis-based U.S. Bank has so far retained a full-service branch at Ohio Union as well as four ATMs. Pat Swanson, who does corporate public relations for U.S. Bancorp – the parent company of U.S. Bank – did not comment on OSU’s partnership with Huntington.
“U.S. Bank is proud of its relationship with the Ohio State University,” Swanson said in an email Dec. 5. “U.S. Bank opened the branch in 2010 and has contributed more than $1 million to the Ohio State University Foundation and the Ohio State University Endowment Fund since that time, including sponsoring the U.S. Bank Conference Theater (in the Ohio Union).”
When asked whether U.S. Bank was given the chance to renew its agreements, which are set to expire in 2015, or pursue a partnership with OSU, Swanson said he was unable to provide information about the contracts for “client confidentiality reasons.”
In February 2012, the same month the Huntington partnership was announced, Geoff Chatas, the OSU chief financial officer and vice president of business and finance, told The Lantern once existing contracts with banks like Chase, U.S. Bank and Fifth Third were up, OSU would not renew them.
Chatas was not made available to The Lantern for comment this semester.
Especially when those contracts expire, students, staff and faculty who haven’t ditched their previous banks for the green Huntington logo could pay for it: Huntington charges a $3.50 fee for those who are non-Huntington bankers to withdraw cash from its ATMs.
OSU’s contract with Huntington also places restrictions on the ways Huntington can advertise: while it is the university’s “official consumer bank,” it is not permitted to mail materials to OSU community members, nor is it permitted to use its provided signage at places like Ohio Stadium to display messages that endorse the bank’s products.
Saunders said the agreement essentially doesn’t allow Huntington to “market credit products (credit cards or loans) to students.”
The bank can, however, advertise to students during orientation by sending letters to students before they come to campus and introducing the partnership and benefits of linking students’ BuckIDs to Huntington accounts at orientation sessions, she said.
The bank also has the option of buying advertising “as frequently as (it) would like in publications that reach students,” including weekly newsletters, Saunders said.
Law professor Paul Rose said Huntington isn’t missing out just because its marketing capabilities are limited.
“They do get some benefits … I’m a good example, right, I used to use U.S. Bank and the fact that Huntington has this program with Ohio State that we get the same deal (as Huntington employees) got me to switch banks,” Rose said. “The university community is large enough that they feel that just offering that deal will get a lot of people to switch.
“They may have advertising restrictions but I think that they gain so much just by having banking locations here on campus, having their name out there, right, just associated with Ohio State.”
OSU faculty, staff and alumni are eligible for access to Huntington’s private financial group, which “provides customized financial expertise and asset management services.” Benefits include discounted rates on personal credit lines, an additional checking account and free cashier’s checks.
Rose said the advertising limitations also might be in place because OSU wants to limit the appearance of helping Huntington too much, given the payments and perks the university is receiving.
“It’s one thing to have a program with them, but to sort of assist them in promoting something that we can’t really verify or we don’t really have the power to control as a business we’re not really in … I don’t think the university is in the business of telling students where to bank,” Rose said.
Officials’ and experts’ opinions
OSU is far from the first or only large public university to get involved in a bank partnership. The U.S. PIRG study said that of the 50 largest U.S. four-year public universities, 32 had financial card partners as of spring 2012.
Several of those on the list that have partnerships are Big Ten schools, including Penn State University, University of Illinois, Indiana University, University of Wisconsin and University of Michigan.
Huntington alone holds contracts with other public universities, including Michigan State University, Cleveland State University and University of Toledo.
David Schamer, of Huntington, said those schools were selected because Huntington has locations in Ohio, Michigan, Western Pennsylvania, West Virginia, Central Indiana and Northern Kentucky, so the bank is “interested in working with schools in these states.”
He said the bank has been working to invest more in higher education institutions recently, leading to these partnerships, and added that Huntington looks at the investments as “long-term.” The goal, he said, is to increase the number of people affiliated with the universities who are enrolled in the bank’s services.
“Our hope is that they’ll choose to bank with us,” Schamer said.
Others said the choice left to students isn’t that simple.
Rohit Chopra, student loan ombudsman at the Consumer Financial Protection Bureau – a government agency established by Congress to “protect consumers by carrying out federal consumer financial laws,” according to its website – said while measures have been taken to monitor credit cards, the same protections aren’t in place with debit cards or checking accounts.
“Currently the CFPB retains a database of all agreements between credit card issuers and colleges and universities, and this is required to be disclosed by financial institutions under the (Credit Card Accountability Responsibility and Disclosure) Act, but no other, there’s no similar requirement for, say, student debit cards or student checking accounts. So we don’t, in many cases, have those contracts to review,” Chopra said.
The CARD Act was signed by Congress in 2009 and requires credit card issuers to disclose the terms and conditions of any college credit card agreements, among other obligations, according to a Tuesday CFPB release.
The bureau announced Tuesday it is asking financial institutions to make their debit card and checking account deals with higher education institutions more public.
“We (are) calling on financial institutions to make the terms of these agreements public just as they do for credit cards. And you know, we think that students and their families should know whether their school is being compensated to encourage students to use a specific card product,” Chopra said. “Many families might believe that the school is choosing a recommended product based on what’s in the best interest of the students.”
He said that lack of information can contribute to students and their families not having all of the facts they might need to make a well-informed decision.
“That may be a significant transparency problem,” he said.
Earlier this year, Chopra said, CFPB found that bank partnerships are often “not well-understood” and that college debit card and checking account agreements are now greater in number than college credit card agreements.
CFPB’s new urging, however, is simply for financial institutions to make the agreements public “on a voluntary basis” and “on their websites,” Chopra said, because there is no similar law to the Card Act for debit cards that legally requires the banks to do so.
Chopra could not comment on specific banks or agreements because those deals are not required to be made available to the CFPB.
Rose said on the university’s end, the private contract seems to be an attempt to keep students’ tuition low while supplying additional revenue for other programs and projects.
“(OSU) requires a lot of money to operate and we’re also operating in an environment where the administration does not want to put any more burden on students as far as tuition, which is obviously a huge source of revenues for the university,” Rose said. “(Partnerships are) a creative way to generate revenues and some of the deals are pretty good deals for faculty and students as well.”
While the $25 million cash payment and $100 million investment are listed along with a few other contract details on the Huntington website, the full contract is not prominently displayed.
Huntington spokesman Brent Wilder declined to comment on the CFPB announcement Tuesday but said the report was being reviewed.
For now, Rose called the OSU-Huntington deal a “good example” of a way for the university to get additional funding.
“(Huntington) produce(s) some internships and (OSU faculty and staff) get the same checking account that the Huntington employees get,” Rose said. “There’s things like that that make it beneficial to the university population beside just the fact that we can get a payment from doing the deal in the first place.”
This story is the third in a five-part series about Ohio State’s contracts with Nike, Huntington, Coca-Cola and QIC Global Infrastructure. The series was made possible by the generosity of Ohio State and The Lantern alumna Patty Miller.
Clarification: Dec. 18, 2013
An earlier version of this article said Pat Swanson said U.S. Bank wasn’t concerned about OSU’s partnership with Huntington, when in fact, Swanson did not comment on the Huntington partnership.
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