How much is your creditworthiness worth? A pita? How about a pizza? What if we threw in a t-shirt? Perpetually cash-strapped and impetuously motivated college students have long been an easy target for banks and lenders hawking credit cards. But while undergrads reaped rewards such as free grub and cutesy collegiate-themed gizmos, the class of 2008 racked up $4,100 in credit card debt spread across 4.6 cards by the time they got their diplomas, according to a Sallie Mae study.
While the blame for this trend can easily divvied up equitably between the tanking economy, the rising cost of tuition, the live-for-today attitude of “kids these days,” and the ease of attaining a credit card,the Credit CARD Act has its sights set on plugging the free flow of plastic on college campuses. Come February 2010, we’ll be seeing a lot less “FREE [fill in the blank]” Kiosks on the quad. Here are some of the restrictions that are queued up for next year:
Consumers under 21 will require a co-signer or proof of repaying credit card debt
Previously, all a college student needed for a credit card was a signature and a mailbox. Now, the CARD Act is requiring proof of income or a co-signer for those under 21. Regardless of any legislation, this measure seems especially prudent, especially after the damage that No income, No Job or Assets (or NINJA, as in defaults and then disappears without a trace) loans did to lending institutions (and the overall economy) last year. This new provision will greatly stem the torrent of new student credit card signups – especially since most students would rather give plasma than phone home to ask for financial help.
Collegiate affinity programs must disclose agreement details, including mailing lists and royalty payments
This is an interesting one. One of the main reasons you see so many credit card reps on campus is because alumni associations invite them. For example, an Atlanta Journal-Constitution article cited University of Georgia’s agreement which stipulated that Bank of America could receive access to names and contact information of students, alumni, parents, UGA donors and season ticketholders as well as space for on-campus marketing. For this, the alumni association, the athletic department and the Arch Foundation get to split a $1 million kickback. On the one hand, it may seem like schools are selling students out – but on the other hand, as the CARD Act effectively hinders such lucrative deals, these departments will be forced to raise money from other sources (tuition hikes, perhaps) or be forced to shut down.
No more freebies or knickknacks on-campus
Say goodbye to the “sign up for a free credit card, get a free hoagie” offers. Actually, the section of the act states that “no card issuer or creditor may offer to a student at an institution of higher education any tangible item to induce such student to apply for or participate in an open end consumer credit plan.” So, I guess “Free Hugs” aren’t off the table yet.
Prescreened offers to consumers under 21 banned
Prescreened offers, recognizable by mailers that announced that you’ve “ALREADY BEEN APPROVED!” and often come with those splendid little cardboard credit cards, will be vastly limited by the CARD Act. This may also pose a problem for college affinity programs that profited from selling student contact details to lenders. The stipulation also states that card issuers can’t increase credit limit without the permission of the co-signer. Of course, you could always opt out of prescreened offers, but this will be particularly helpful to students who don’t have the time or motivation to uncheck the “Yes, sell me stuff” box.
While many college campuses are already seeing creditors abandoning their efforts, other experts predict one final push before the laws kick in. Consumers Union representative Gail Hillebrand told USA Today that they were calling it “the last open season on credit for college students.” So, while credit card offers will be free to masquerade as free giveaways with low, low introductory rates this Halloween, Bank of America will be legally barred from asking you to be its Valentine come February.
Classes are in session – have any of you noticed a rally in efforts, or has it all been quiet on the campus front?
Photo by SMercury98