Credit Card Bill Targets Exploitation of Students

Garineh Demirjian

It may soon become harder for banks and other lending institutions to pester students on campus to sign up for high-interest credit cards if the state legislature has its way.

The College Student Credit Protection Act (AB 262) that was signed Oct. 14 by Gov. Schwarzenegger will help shield college students from the luring promises such as gifts or low-interest rates from creditors.

The bill was written by Assemblymember Joe Coto, D-San Jose, and sponsored by the Greenling Institute, which is a multi-ethnic research organization whose goal is to increase low-income and minority participation in policy-making.

The bill will require colleges throughout California to disclose information pertaining to the school’s marketing agreements with all financial institutions, with the exception of proprietary information. This means that if any faulty practices have already been put into place, proper procedures could help regulate their contents.

The bill also stops credit card companies from offering gifts as rewards for joining or using their services, which means no more fancy pens or company buttons.

As the number of students suffering from staggering credit card bills increases, so does the need to combat the problem.

According to Mark Maier, an economics instructor, credit card companies should be allowed on campus because “If we allow other private firms, probably we should allow them. Perhaps there could be a ‘code of conduct’ that credit card issuers would need to sign before being allowed to solicit business on campus.”

The bill will urge universities to revise and re-think the ways in which they handle marketing on their campuses, which may significantly lower the number of debt-ridden students.

Since the bill passed with little opposition, banks have agreed to work with students and colleges in creating an agreement that will be beneficial to all parties.

According to the website of Nellie Mae, a student loan company, credit card companies are cruel predators: “They’ll bait you with free T-shirts and music downloads and then attack your newfound hunger for independence as soon as you’re in college and far from your parents.”

Maier says that students often don’t know how credit cards work.

In his book (written with Julie A. Nelson), “Introducing Economics: A Critical Guide for Teaching,” he says that “In a personal finance survey by the consumer education advocacy group Jump$tart, fewer than half of high school student respondents correctly answered questions about credit cards, credit history reports, savings programs, investment options, and retirement.”

The book recommends that “before using any materials, it is a good practice to check to see who they are sponsored by. Visa, the credit card company, for example, offers an online ‘Practical Money Skills for Life’ program that not surprisingly advises students to carry credit balances, but not balances that are overly high. A booklet ‘Talking to Teens about Money,’ sponsored by Capital One, another major credit card issuer similarly advises students to carry balances on their cards.”

In 2004, more than 75 percent of college students nationwide had at least one credit card, according to the Nellie Mae website. Of that number, the average graduate student accrues about $5,800 in credit card debt; nearly double that of the average, undergraduate.

Alex Danaci, a communications major, feels that credit cards are necessary for consumers today despite the fact that he is $8,000 in debt and in his third year of college. “If you don’t have a job and don’t receive financial aid and you need to pay for anything be it food or gas, a credit card is your only choice”

The state bill’s objective is to persuade the UC regents to change its 2004 policy that excuses many of the banks from many of the universities restrictions.

“Many California public university students, of all incomes and backgrounds, are graduating into severe credit card debt. AB 262 will help to protect the students who represent the future of California’s economy,” Coto said in a Greenlining Institution press release.

However, major credit card companies and banks are not the only ones looking at college students as bait. There are fliers posted all over campus that read “Have no credit or less than perfect credit? Sign up for one of these special cards and jump start your personal credit history now!”

So the temptation to open a new credit card account is everywhere, some are just more prevalent and come bearing gifts.