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Report: Consumer Protection
Graduating Into Debt
Not long ago, credit cards were reserved for those who could prove that they had the income and self-discipline to manage credit. A college student could not obtain a credit card unless a parent co-signed.
In the past 10 years, the stereotype of the financially struggling student has been replaced by the image of the credit card wielding student who wants for nothing. Credit cards have given students financial freedom—freedom to purchase clothes, electronic equipment, and exotic spring vacations. But many question whether that freedom has come at too high a price—increased bankruptcy filings among young adults, students being forced to drop out of school because of debt, and students graduating and starting life with a high debt load.
Complaints from students and parents in Maryland spurred several state legislators to introduce legislation to address credit card marketing to students.1No legislation was enacted, and the hearings that were held to consider the legislation left unanswered questions about the extent of credit card marketing on Maryland public campuses and the policies, if any, of public colleges and universities regarding credit card solicitation.
This report addresses those unanswered questions, including:
• What type of credit card marketing occurs on Maryland campuses?
• Do schools have policies in place to prohibit or limit credit card marketing to students?
• Do schools sell their students’ personal information to credit card issuers?
• Do colleges provide any education to students about the proper use of credit cards?
The results of this survey show that credit card marketing varies widely among Maryland colleges and universities. Some schools prohibit credit card marketing on campus, some allow marketing with certain restrictions, and others have no restrictions. Specific findings include:
• Credit card vendors are setting up tables on some campuses in violation of university policies prohibiting or limiting tabling.
• At least two schools currently sell their student lists (names, addresses and telephone numbers) to credit card issuers.
• Several schools have exclusive marketing agreements with one credit card issuer for which they receive financial compensation.
• Only one school that allows on-campus marketing has a comprehensive written policy specifically governing credit card marketing.
• A few schools teach students about credit card use and personal finance as part of student orientation.
• Most education about credit cards and personal finance provided by schools is voluntary and few students attend.
We recommend the following actions be taken in order to address the problems and issues raised by credit card marketing to college students.
• Colleges and universities in Maryland should establish specific written policies with the input of students, parents and administrators on credit card marketing to students.
• Colleges and universities should be prohibited from selling students’ personal information to commercial entities.
• Colleges and universities should provide credit card education as a required part of freshman orientation. The education should be provided by university personnel or by an independent source, not a credit card issuer.
• Personal finance education should be a graduation requirement for all Maryland high school seniors.
• Credit card issuers and universities should crack down on unauthorized marketing on college campuses.
• Credit card issuers should adopt more conservative lending policies for college students and should place reasonable credit limits on accounts based on students’ income.
• Congress should enact a national interest rate cap for credit cards, require higher minimum payments, require disclosure of the length of time it will take to pay off an account if only the minimum payment is made, place limits on late fees and penalty interest rates, and prohibit penalty interest rates for late payments to other creditors.2
1 See page 15 of report for discussion of legislation introduced in Maryland.
2 These reforms cannot be enacted by the states because of federal preemption of many state laws regulating banks. Demos: A Network of Ideas and Action, Borrowing to Make Ends Meet, The Growth of Credit Card Debt in the ‘90’s, Sept. 2003, New York, New York, p.33 to 35.
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