Companies that offer credit card services often visit college campuses in an effort to attract new customers. In New Jersey, the Division of Consumer Affairs has notified all public and private colleges that a new law which took effect in May is regulating that practice.
Under the Credit Card Solicitation Act, credit card companies are allowed to visit a college campus only after registering with the educational institution. Another provision of the act prohibits the credit card companies from offering incentives such as gifts.
“This law is designed to encourage responsibility on the part of the companies and the students,” said Thomas R. Calcagni, acting director of the Division of Consumer Affairs. “College is the perfect time for students to build good credit, and the law is meant to ensure that students are on a path to good credit.”
Any company that wants to solicit business on a college campus must also agree to provide an on-campus program that informs students about interest on unpaid balances and the amount of time it takes to pay off balances if only minimum monthly payments are made.
In addition, the programs are required to explain the difference between any introductory interest rates and normal rates.
Students must then present a certificate to the company’s representative in order to prove they attended the informational program.
“Ultimately, the student is responsible for his or her own finances, but apart from students and their families, no one has a bigger stake in the students’ financial futures than credit card companies,” Calcagni said.
Companies may not take any form of debt collection action against a parent or guardian unless he or she has agreed in writing to be liable for a student’s debt. The card issuers are therefore liable for any damages, and the companies will be fined between $5,000 and $10,000 for each violation of the Credit Card Solicitation Act.
The Division of Consumer Affairs plans to enforce the Credit Card Solicitation Act with the help of consumers who have been asked to report any violations of the act.
On the federal level, the Credit Card Accountability Responsibility and Disclosure Act (CARD Act) was signed into law by President Barack Obama in May 2009. One provision in that bill has changed the way people under the age of 21 can obtain a credit card.
If someone under the age of 21 wants a credit card, he or she must either have a cosigner who is over the age of 21 or demonstrate an ability to repay the debt.
“For young people, a credit card is usually the first foray into the world of credit,” said Peter Garuccio, vice president of public relations for the American Bankers Association. “Building good credit is not only useful, but necessary.”
When speaking about the CARD Act, Garuccio acknowledged the motives behind the bill, but addressed concerns over its potential side effects.
“Bankers understand why Congress felt the need to pass this law, but you can also be limiting the ability for students to establish good credit,” he said.
“The key is to understand how credit cards are used by college students. And, on average, students manage credit better than the adult population,” said Garuccio, who cited a report by Student Monitor, a research organization.
Student Monitor reported in 2009 that 45 percent of college students have a credit card and that 60 percent of those students pay their monthly bill in full. The report also said college students are most likely to use a credit card when making a purchase online or at a department store.
Garuccio also restated the importance for lawmakers to “allow students access to credit,” while remembering that credit card companies have a vested interest in the financial status of students, who are a potential source of future business.
“They want it to be the start of a good relationship,” he said.