Braden Smith – Opinion editor. During the summer, President Barack Obama signed into law the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009, which builds upon the Truth in Lending Act of 1968.
The new law, which went into effect this month, will make it harder than ever for college students and anyone less than 21 years of age to get a credit card. This is an attempt to produce financially responsible cardholders. The legislation only affects those less than 21 years old who do not already own a credit card.
One rule requires that anyone under 21 years old must have someone over 21, such as a parent or spouse, co-sign for the credit card and vouch for the applicant so that he or she will be held responsible if the cardholder cannot or does not pay.
All new applicants must also show proof of income before receiving a credit card. Previously, one could simply co-sign for a credit card with his or her parents and not have to worry about income.
In addition, the sum that cardholders can borrow will be based on a percentage of their income, so students working part-time jobs will have lower spending limits than students working full-time or who make more money. This provision aims to reduce the credit card debt of graduating students.
A study by the Sallie Mae Corp., released in April 2009, found that college seniors graduate with an average of $4,000 in credit card debt.
Finally, students must pass a course in financial management before they are eligible for a credit card.
In the past, banks would often visit college campuses and offer free gifts, such as hats and T-shirts, in exchange for applying for a credit card. But this is now illegal. Banks may no longer offer what the law calls “inducements” to students on or near a campus, or at any event sponsored by the campus.
Card issuers may still market credit cards on campus as long as they reach an agreement with the college or university. The agreement must be publicized.
“An institution of higher education shall publicly disclose any contract or other agreement made with a card issuer or creditor for the purpose of marketing a credit card,” the law states.
Vice President of Marketing for eBillme Samer Forzley provided most of this information and thought the law was essentially good for students.
“The good news is that when you graduate from college, you should be more financially sound,” he said. “So, [for] the student, it might make things a bit more difficult on day-to-day things, but, actually, it helps you graduate debt-free.”
Forzley also mentioned that the law will cause banks to lose a significant amount of money, resulting in banks changing their billing practices.
An article from USAToday.com reported that some banks, such as Fifth Third Bank, have started issuing inactivity fees, rather than simply closing a credit card that is inactive for a set amount of time.
In light of the economic recession, the law aims to produce more financially responsible citizens.
While students less than 21 may have a tougher time applying and using credit cards in the future and with banks scrambling to regain lost profits, the law intends to get students through college with less credit card debt and more financial wisdom.
You can find out more about eBillme at www.eBillme.com
Loading ...