New credit card laws aim to protect students

As new state and federal laws go into effect this year, credit card companies will face new restrictions when marketing their products to college students, and some students will find it more difficult to get their own credit card.

The Credit Card Marketing Act of 2009, a piece of Illinois legislation that went into effect Jan. 1, prohibits credit card companies from marketing to undergraduate students under the age of 21 on college campuses. Companies will no longer be able to offer students free items, such as T–shirts and iPods, in exchange for signing up for a credit card.

“Young people, many of whom do not have the financial know how to manage their money, often fall victim to these tactics and become buried in debt for years to come,” said Illinois State Treasurer Alexi Giannoulias in a press release issued Dec. 30, 2009.

Giannoulias, also a Democratic candidate in the 2010 U.S. Senate race, drafted a version of the bill early last year.

The act requires institutions of higher education to publicly disclose any agreements with credit card companies made after Jan. 1 and to provide online financial education for students if the institution enters into this type of agreement.

TCF Bank, which has been partnered with the University since 2007, will not be affected by the new legislation, said Christina Castro, vice president of campus banking for TCF. While students are able to merge their i-cards with a TCF check card, she said most of the regulations do not apply to the bank because its campus locations offer basic accounts for checking and savings.

The University’s contract with TCF prohibits the bank from marketing credit cards to students, said Doug Beckmann, senior associate vice president for business and finance and deputy comptroller for the University.

While the act does not prohibit credit card companies from marketing to students off campus, universities and their affiliates, including student and alumni organizations, are not allowed to provide companies with the personal information of students younger than the age of 21.

Beckmann said the University already operated under these restrictions prior to the legislation going into effect.

“We would never give our student mailing list to a card company to market,” he said. “That’s not something we’re interested in at all.”

At the national level, other credit card laws will affect students who want to get a credit card without permission from their parents, spouse or legal guardian.

Effective Feb. 22, the Credit Card Accountability, Responsibility and Disclosure Act of 2009, or the Credit CARD Act, will make it difficult for consumers nationwide under the age of 21 to sign up for a credit card.

According to the act, all consumers under the age of 21 must sign a credit card contract co-signed by a parent, spouse or legal guardian who is 21 years or older, unless the applicant can provide sufficient proof of an income that will support the payments.

Like the Illinois act, the Credit CARD Act requires universities and credit card companies to disclose agreements, prohibits items from being given away to lure students into applying for a credit card on or near campus and advises universities to provide financial education for students.

Some students at the University said they think the laws are overprotective.

“This is the time we all need to be building credit,” said Oana Toma, sophomore in Engineering. “We will need good credit to buy a house or a car in the future.”

Toma, who has a credit card, said irresponsible credit card use is not unique to college students. She said people over the age of 21 often purchase things with credit cards that they may not be able to afford.

“A lot of students just use it (a credit card) like a debit card,” she said. “They are responsible with it, and they monitor how much they are spending.”

While the University supported the Illinois legislation to help students, Beckmann said discussion between students and their families is still the most important part of learning financial responsibility.

“We don’t want them (students) to be preyed upon,” he said. “At the same time, I want to be careful to say, we also respect that they are young adults. This isn’t that we want to build a bubble around them.”