Many college students leave school buried with debt piled up from credit cards and student loans. New legislation aims to keep credit card companies and college students accountable for every time students hand cashiers that little piece of plastic.
President Barack Obama signed the Credit Card Accountability, Responsibility and Disclosure (CARD) Act in May 2009, but it is finally going into effect Feb. 22.
Haley Chitty, director of communications of the National Association of Student Financial Aid Administrations (NASFAA), said in addition to limitations the CARD law creates for credit card companies, the law aims to provide college students with credit while protecting them from high interest rates and fees.
“Basically this is Congress’ attempt to provide additional protection to students,” Chitty said.
Chitty said these protections include an end to retroactive rates, a rule stating that rate increases due to late payments be eliminated after six months of on-time payment, and a requirement that extra card holder payments – such as cash advances – be applied to balances with the highest interest rate.
According to Chitty, the law will make it more difficult for college students to obtain a credit card. Most people under the age of 21 will need a parent or guardian to co-sign for a credit card unless they can demonstrate sufficient ability to repay the debt.
“Students will be more aware of the implications of signing for a credit card,” Chitty said. “The goal of the law is to make sure students are more fiscally responsible and financially educated.”
Chitty said provision and protection are tough to balance. She said Congress wants to assure protection through a more knowledgeable consumer. However, if students can prove means of paying bills they will be able to sign up for a credit card.
“The best scenario is that the law will prevent students from taking out credit cards with high fees while at the same time allowing credit cards to the financially responsible,” Chitty said.
According to Chitty, credit card companies will be held responsible for informing consumers of exactly how long it will take to pay off a balance by making the minimum monthly payments and the subsequent cost in interest.
“Our (NASFAA) role is to notify our members on how to comply with the new laws,” Chitty said. “We give financial aid offices guidance and information.”
Chuck Knepfle, Miami University’s director of student financial assistance, said credit card companies make money by charging the school for any transactions made through the school. Miami passes these fees along to students.
“It is purposely harder to pay tuition with a credit card at Miami,” Knepfle said. “There is a percentage fee attached to each transaction.”
According to Assistant Bursar Anne Palmer, Miami received 8,084 credit card payments totaling $5,387,776 in 2009.
“Anecdotally we have talked to students dealing with personal debt,” Knepfle said.
Credit card companies are known to specifically target college students with offers for free merchandise and rewards.
“In recent years there has been a broader marketing of credit cards to college students, especially with the economic crisis,” Chitty said.
Miami junior Lynn Susong said she uses one of her multiple credit cards to make some of her payments while in Oxford.
“I have a friend with a wallet full of credit cards,” Susong said. “She signs up for them to get the free gimmicks, like a towel.”
Chitty said the CARD law will make it more difficult for companies to market on college campuses because they will be required to provide additional disclosures that will be posted online.
“I personally think that credit card companies are feasting on college students,” Knepfle said.
Knepfle said employees at Miami saw the vendors were not a good thing so there was a decrease in vendors on Miami’s campus before the credit crisis.
“I think this bill will help students by protecting them from marketers because there will be fewer opportunities for students to sign up for credit companies,” Knepfle said.