New Jersey Governor Chris Christie’s signature is the only thing needed to prohibit credit card companies from soliciting college students on campuses across the state. The Senate approved the bill last week week.
There are already schools, including both Rowan University and Rutgers-Camden campuses, that have banned these companies and still others that have never allowed them to target college students, who rarely have the means to repay their loans, leaving them in debt and completely unprepared for the aggressive collection tactics used. Many are completely unprepared for proper money management, much less responsible money habits that include on time payments.
Not Welcome Here
Rowan University spokesman Joseph Cardona said his school hasn’t allowed credit card companies on his campus for at least ten years and State Sen. Kevin O’Toole, R-Essex said the efforts of the companies entices these young people to open accounts they can’t maintain which leads them to high debt, courtesy of high interest rates, before they ever even graduate. He also said tactics used, such as offering sports-themed t-shirts, blankets or other promotional items, cost these students who have no idea that it’s really not ‘free’.
The bill is designed to protect college students from what they’re calling “predatory practices” that the credit card companies typically use. It will also keep colleges from making money by allowing these companies onsite to hawk their cards. Colleges have historically signed impressive marketing agreements with the financial companies, including Penn State University’s Alumni Association, which received an alarming $4.2 million in 2010 alone. If the governor signs it into law, and he’s expected to, public colleges or universities, their agents or any student organizations will be prohibited from entering into any kind of contractual agreement with the card companies.
This has been troublesome for years and it’s an important element of President Obama’s 2010 CARD Act, which makes it illegal for anyone under the age of 21 – college students included – to apply for a credit card without proper means of repaying the debt.
Prior to the new law, credit card companies would offer coupons for free food to students who then realized they couldn’t be used until and unless the student filled out a credit application. Many did so for the fast food freebies, unaware of the repercussions to their credit. Many students found it manipulative, but still, the practices continued and even the “free loot” increased, making it difficult for some to resist.
Once the laws began to change, and once dozens of college campuses across the country began banning them from campus, the credit card companies then would solicit just off campus and with it, came even more free stuff. It allowed some credit card companies to circumvent college policies that no longer allow them to solicit on campus. A few of those schools included Ohio State university and Georgetown University.
The new laws have proven to be a blow to companies that see colleges and universities as fertile ground for cultivating new customers. It couldn’t have come fast enough for some deans who believed the schools were putting in regulations, only to have some card networks circumvent those policies by targeting students coming and leaving school grounds.
Ohio’s Line in the Sand
Before long, the state of Ohio had filed a lawsuits against some credit card companies that were handing out fliers offering free tacos and burritos to college students that showed their student IDs at the restaurant. Once the students arrived, they learned then that they were required to fill out credit card applications in order to get the free food. Ohio State Attorney General said it violated the state’s consumer protection laws when it used deceptive marketing. That was in 2008 – and since then, of course, the laws have changed and continue to change, making it nearly illegal in every instance for a credit card company to target anyone – college student or not – who’s under the age of 21.
That same year, a survey conducted by Nellie Mae found that 76% of college undergraduates owned a credit card and an alarming 43% owned at least four. Some were carrying balances of more than $2,000 on each of those credit cards. A 2008 survey by the U.S. Public Interest Research Group found that 80% of students said they received direct mail from card companies with their names on the envelope. In addition, 22% said they received about four phone calls, on average, a month from credit card companies. In fact, the words “bombarded” were used in that report; interestingly enough, that same word is being used in these latest studies, as well.
The problem has only worsened since then. A survey conducted earlier this year shows that 70% of college students still have credit cards, 75% of them have no idea what their late payments are each month and 80% have no idea what their interest rates are nor do they know what the fees are if they go over their limits. A full 90% of college students who own credit cards are carrying significant credit card debt; in other words, they’re not paying their balances in full each month. In 2008, 79% carried debt from month to month. One student named Mike applied for his first credit card his freshman year of college to get the free T-shirt. By the end of the year he had seven credit cards and thousands of dollars of debt. “I didn’t really think ahead,” he said. His story is no different from hundreds of thousands college students in the same sinking ship.
While the new laws are in place with the goal of protecting these young people, the bottom line is that too many are still finding their way around the legal loop holes. New Jersey, if it has its way and if the governor signs the bill, will be one of the first states to pass some of the strictest credit card laws for college students in the nation.
What are your thoughts? Were you or are you now being targeted by credit card companies? Did you find getting approved to be an easy process? Share your story with us.