When the CARD Act was introduced in 2009, consumer advocates considered it nothing short of a game changer for college students vulnerable to aggressive credit marketing.
How could they not? Under the Act, issuers were supposed to stop offering freebies (pizza, t-shirts and the like) to lure students into filling out applications. They were also banned from issuing credit to anyone under the age of 21 without demanding either a co-signer or proof that the applicant earned enough to pay back the debt.
side from the age and income requirements, the legislation prevents credit card issuers from offering “any tangible item” (such as t-shirts and free pizza) to students who sign up for a credit card. The issuers also can’t offer any gifts “near the campus” or at an “event sponsored by or related to an institution of higher learning.” But as long as credit card issuers aren’t offering gifts, they can actually market to students on campus.Source: Credit.com (http://s.tt/15E1k)
It all sounded great on paper but according to new research from the University of Houston, things haven’t exactly worked out as planned.
In a survey of 500 college students over a two-year period, law professor Jim Hawkins found 68 per cent of students under 21 said they still received credit mailings and 40 per cent of students reported seeing credit agents passing out ‘gifts’ to students on campus.
“Most troubling, students are still qualifying for credit cards without demonstrating an ability to repay the debt,” he said. “My study found that 27 per cent of students under 21 who were applying by themselves for credit cards listed loans as part of their income to qualify for the card.”
Here’s the problem: The CARD Act doesn’t ban marketing itself. It just takes away some of the bells and whistles issuers used to employ in their strategy. It also doesn’t block companies from mailing younger consumers credit offers but rather makes it harder for them to track down their addresses.
The full study will be published this fall in the Washington and Lee Law Review in fall 2012.
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