Law to Protect Students From Crediators

Law to Protect Students From Crediators
By Meredith Skrzypczak
The State News
Published: May 25, 2009

Students will have further protections from credit card company practices because of a bill signed into law by President Barack Obama on Friday.

Those practices include aggressive solicitation, unclear terms of agreement, interest rate hikes and added fees.

The Credit Card Accountability, Responsibility and Disclosure (CARD) Act will place student safeguards against practices federal and state officials call “misleading,” while also making it harder for students to obtain credit cards.

“Now you need a law degree to understand (credit card agreements),” said Justine Sessions, a U.S. Senate banking committee aide. “They’re full of little tricks and traps that get a lot of consumers in big trouble, particularly young consumers … at the same time, they are aggressively marketing cards to students.”

Students no longer would be randomly solicited to apply for credit cards and would have a choice to “opt in” for credit card offers, Sessions said.

“Most students will absolutely not be affected,” said Joyce Banish, vice president of university and community relations at MSU Federal Credit Union. “The only thing is that this may require that the student would not be able to have a card without a cosigner.”

As part of the new law, credit card applicants under the age of 21 must provide a cosigner or proof of income.

“It would be requiring us to have a student prove that they have $500 a month in income to qualify for a credit card, which is difficult because of the lack of permanent jobs that students have,” Banish said.

Students also would need cosigner approval on all limit increases. Although the law might make it harder for young people to receive credit, some students can see the benefits.

“I think it is a very good thing to protect (students’) rights if the credit card companies are misdirecting them,” said Ryan Kelly, a computer science and Japanese senior. “It’s just unfair. It’s like cigarette companies advertising to kids.”

A report released earlier this year by Sallie Mae, a student loans provider, showed that 84 percent of undergraduates have at least one credit card, but the average student has more than four. The report also showed that almost one in five college seniors hold $7,000 or more in credit card debt.

State officials see the new law as a tool in helping students decrease their debt.

“Right now, college students on campuses across Michigan are carrying thousands of dollars in credit card debt,” said Matt Williams, a spokesman for U.S. Sen. Debbie Stabenow, D-Mich., in an e-mail. “Students and all credit card holders should not be penalized with unfair fees or sudden interest rate hikes.”

Even with the new law in place, students still need to be responsible, said Susan Schmidt, chief of staff for state Rep. Mark Meadows, D-East Lansing.

“This would be more protection for (credit card) users, and of course this would affect students because they are users,” Schmidt said. “Any of these measures will have a positive effect.”

The new law also would require credit card companies to provide greater disclosure of billing details, rates and terms of agreement to eliminate misunderstandings. It also would protect card holders from sudden interest rate, fees and finance increases.

The changes required by the law will go into effect in nine months.

Source-:statenews.com