Credit Card Issuers Target Students, Despite Reform Rules

A new study shows that college students are still being targeted with mailed offers and gifts from credit card issuers, despite reform rules that took effect two years ago with the intent to diminish such practices. International students should check out this article about the best credit cards for them over on
The research also shows that young consumers are still qualifying for credit cards without having to demonstrate they have enough income to pay off the debt, as specified by a provision in the so-called Credit CARD Act.
Most of the Credit Card Accountability Responsibility and Disclosure Act of 2009, or Credit CARD Act, were provisions amending the Truth in Lending Act and took effect on Feb. 22, 2010.
The study by Jim Hawkins, a professor and consumer credit expert with the University of Houston Law Center, is the first extensive review of the CARD Act’s impact on young costumers who can least afford mounting credit card debt.
Hawkins surveyed more than 500 students and examined 300 agreements between issuers and colleges and alumni associations over the past two years.
His study found that 68 percent of students under 21 reported receiving credit card offers in the mail during the preceding year, a practice the Act’s sponsors hoped to curtail.
Forty percent of students reported seeing credit card companies giving gifts to students while the Act was in effect.
“Based on this survey and study, I found that many of the CARD Act’s student and young consumer provisions have not affected credit markets in the ways the Act’s proponents had hoped,” Hawkins said.
Under the Credit CARD Act, issuers are prohibited from opening an account for a consumer who is younger than the age of 21, unless the consumer has the ability to make the required payments or obtains the signature of a parent or other cosigner with the ability to do so.
Card issuers are also prohibited from offering free gifts in exchange for credit card applications on college campuses.
The reform even requires that a cosigner agree in writing to any credit limit increase.
“My study found that 27 percent of students under 21 who were applying by themselves for credit cards listed loans as part of their income to qualify for the card,” Hawkins said.
However, Hawkins points out that the Credit CARD Act does not explicitly ban sending consumer under 21 credit card offers in the mail – it just makes it more difficult to get their addresses.
The Act also does not ban credit card marketing on colleges; it just prevents one narrow type of advertising, Hawkins said.
“If Congress was concerned about people under 21 receiving credit card offers in the mail, it could directly prevent that conduct by making it illegal to mail anyone under 21 a credit card offer,” Hawkins said. “Similarly, if Congress was concerned about abusive terms in the agreements between credit card companies and colleges, it could directly forbid those abusive terms instead of just requiring companies disclose the agreements.”
Hawkins also said the requirement that credit card companies disclose previously secret agreements between issuers and colleges has caused virtually no change in the number of these agreements or their terms.

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