Students tempted by the allure of a free Fat Cat sandwich or T-shirt along with signing up for a credit card won’t be for much longer, as credit card reform will soon come to the Banks and college campuses across the country.
Beginning in February 2011, credit card companies will be prohibited from enticing students with “freebie” offers to sign up for plastic on or near college campuses, as part of new provisions laid out in the Credit Card Accountability, Responsibility and Disclosure Act of 2009.
“It is all part of the effort to try to stop the circus atmosphere when it comes to credit,” said Credit.com co-founder and CEO Adam Levin.
In addition to the campus marketing reforms, the law will require credit card purchasers under the age of 21 to prove their ability to independently pay their credit card bills or have a parent or responsible person agree to co-sign for a card, Levin said.
The Credit CARD Act of 2009 will also require the disclosure of the relationships between banks and colleges on things like compensation for the right to market credit to alumni, said Connie Prater, a Creditcards.com senior writer.
For years, universities would provide companies with the names and contact information of graduates in sometimes multi-million dollar compensation deals, Prater said.
Companies would then in turn use the information to solicit college graduates into buying an alumni credit card, she said.
Elizabeth Diamond, a graduate student who makes use of her credit card weekly, suggests that people just be more careful about spending with credit.
“If someone is responsible, [the act] isn’t necessary,” she said.
Now under 2009 act, colleges must file reports with the federal government detailing the information they are giving and the compensation they are receiving from the companies.
“It will really shine a lot of light on what has been going on behind the scenes for years on campuses,” Prater said.
The college credit card provisions stem from lawmakers’ attempts to keep young people from being saddled with debt early in their lives, Prater said.
Several studies showed the difficult time students were having managing their credit and how susceptible students were to the enticements of “freebies” like pizza and hats that companies were using to lure young people into signing up for credit cards, she said.
“A lot of times the only thing they had in their minds was the free food or the giveaway and not the potential pitfalls a credit card would have on their lives,” Prater said.
A 2009 Sallie Mae study found that 84 percent of undergraduates had at least one credit card and that, on average, half of college students had four or more cards.
Only 17 percent of respondents said they regularly paid off all cards each month, with the remaining 82 percent admitting they carried balances and thus incurred finance charges each month.
The study also found that the average student credit card debt, beyond loans, is somewhere just south of $3,000 and in many cases a lot more, Levin said.
“A lot of students have gotten into debt over the years because they have been handed a credit card that can either be a wonderful enabler or an instrument of financial destruction,” he said.
Lawmakers began to receive complaints from credit counseling companies and parents, and eventually the act came into fruition, Prater said.
“The University has a policy on charitable and commercial solicitation on campus that prohibits credit card solicitation,” said Vice President for Student Affairs Gregory S. Blimling in an e-mail correspondence.
During the summer, the state legislature passed a law restricting credit card solicitation on college campuses and there was a recent federal law that also restricts credit card solicitation of college students, Blimling said. The Dean of Students Offices, Student Involvement and the student centers primarily enforce the policy.
Supporters of the law think the measures will protect students by causing pause and thought, and will slow down a process that has gotten out of control, Levin said.
But there is also strong opposition to the law.
Prater said those in opposition think many students who are 20 years old, financially independent and live independently are being treated like children when they are actually responsible adults.
Other opponents point out that not every student has a parent that could co-sign, as many students have parents with bad credit or other family situations that prohibit them from signing for a card, she said.
Some stand opposed to the idea of making it more difficult for students to obtain credit, with good credit serving as a backbone to getting everything from a car to a job.
Even the notion of “near campus” soliciting has sparked a debate about the strength of the law. With “near” campus not clearly defined, Levin fears that in places like New Brunswick, where town and gown are intertwined, credit card companies could be waiting just off-campus.
“Even if the credit card companies didn’t show up on campus, it certainly wouldn’t prevent them from having a phalanx of locusts standing at the gates on George Street or Easton Avenue,” Levin said.
Some University students are very passionate about the law and credit cards in general.
School of Arts and Sciences senior Sean Boyle said on-campus credit card marketing is similar to that of cigarette companies selling ads during children’s programs. But he thinks students need to look past the freebie and make sure they know what they are getting into.
“College students shouldn’t be getting credit cards,” Boyle said. “It will only get them into debt.”
Michelle Rofrano, who is a cardholder, said her parents help in paying bills but understands how difficult it would be to pay without their help.
“Credit cards are an easy way to end up in debt … It’s easier to spend,” said Rofrano, a Mason Gross School of the Arts first-year student.
Levin blames much of the credit card problem on a lack of credit literacy among parents and students in the country.
“There seems to be greater desire for people to have an in-depth understanding of trigonometry and Shakespeare than any understanding of how to responsibly use credit cards and how pervasive and critical credit can be in people’s lives,” Levin said.
At the University and many other colleges nationwide, there are no required life financial planning classes, he said.
“For a nation as literate as we are, it is shocking how financially illiterate we are,” he said.
University economics professor Roberto Chang said credit cards are often a source of too much temptation for young people and recommends that they make purchases through other means such as cash, debit or checks.
“My advice is, generally, don’t [use credit] … That’s a good practice until you feel you are in control of your finances,” Chang said.
Prater suggests that students who wish to sign up for a credit card need to make sure they understand all the terms, consequences and interest rates involved with the card and that a credit card is not free money, but a loan.
He advises students to look into secured credit cards that work like prepaid cards, yet allow for students to show a history of taking and paying back that is necessary for showing good credit.
An option that allows a student to sign on to a parent’s account and have the benefits of their parent’s credit history reflected on theirs may also appeal to some students, Prater said.
“Don’t spend more than you take in each month,” she said.
— Colleen Roache contributed to this article
New act to prohibit credit card companies on campus
Published: Wednesday, September 2, 2009
Updated: Thursday, September 3, 2009
 "Photo: Andrew Howard / Photography Editor")
Andrew Howard / Photography Editor
While a new 2009 act proposes to keep credit card companies from soliciting to students on campus with added incentives, applicants must prove their ability to pay bills before signing up for a credit card.
6 comments
I also will point out something my Harvard law Professor Paul Freund taught me.."A unilaterally change in contract makes a contract null and void". Most of these credit card companies unilaterally change their conditions over the years. therefore, tyou, he student, are not obligated to pay back anything..the debt is null and void.
Suing these credit card companies and their debt collecting cohorts is difficult as they are off shore. Getting legal jurisdiction over these companies is difficult if you initiate the suit. However, if they sue you, the pay the initial court fees and you now have jurisdiction over them. Then you can counter- sue with the Harvard response above. You can google court papers quite easily these days. Remember with Google you are effectively the second best lawyer.
Consider the credit card a scholarship and a donation to you as a student. Students should organize and consider a class action suit or even a Qui Tam suit. You can include the banks which give you student loans at outrageous unforgivable and intentionally unpayable rates.
Consider the above ias nstructional information and not legal advice. I can give you legal advice on patent matters as a patent agent, but not on contracts law. Therefore, I quote the information my old Harvard Professor gave me. If its good enough for Harvard students , its even better for Rutgers students.
Welcome to the fight....your future is in your hands...all you need is to know how to Google and a clear direction.Senator Emeritus Jorge Pieczenik,
Department of Biochemistry and Microbiology
SEBS
Harvard 65, Phillips Academy Andover 61