Protect students from credit card debt

(FOX Providence) - Young consumers, especially college students, are now protected from excessive credit card debt under the new federal Credit CARD Act of 2009

With students facing increasing debt levels when it comes to borrowing for college loans, consumer advocates have been looking to put restraints on the credit card industries which target many of those same students.

Peter Kerwin from the Rhode Island Higher Education Assistance Authority joined The Rhode Show to talk about what those changes mean for students.

What can students expect in terms of credit card companies targeting them on campus?

For years consumer advocates have been saying that something has to be done about the aggressive marketing efforts credit card companies make on campus. I mean, you have students away from home living on their own for the first time, being approached with credit card offers which seemed to promise free money. What could go wrong with that right? You had students getting surprised by retroactive rate increases, massive late fees and—before they knew it—significant debts.

The Credit Card Accountability Responsibility and Disclosure Act shields all credit card holders from abusive practices by credit card companies, but it also creates special protections for young adults in response to complaints about aggressive marketing approaches. Companies can no longer give credit to people under the age of 21 without verifying their ability to pay. They have to have a co-signer or be able to show some source of income, such as wages from a part-time or summer job.

At the same time, the new law prohibits the practice of offering freebies like pizza or t-shirts to get students to fill out credit card applications at campus events. Colleges and universities are prohibited from knowingly allowing credit cards to be marketed to students on campus with the offer of gifts, coupons or other property. And any time a college has an exclusive deal with a credit card company, both the college and company have to publicly disclose the details of the arrangement.

What else can students do to protect themselves?

They need to know that they are still going to be targeted with direct mail solicitations and see credit card tables at different events. They have to remember that if it sounds to good to be true…it is. None of these companies are handing out free money. They are luring students into a debt trap and it’s up to them to know their situation and know the costs going in.

The new legislation does require fair notice of rate and fee increases, but it didn’t put a cap on the interest rate which credit card issuers can charge, so it is still important for consumers to know what they are getting into and to be serious about using credit cards in a responsible way.