Campus credit card regulation brewing ... again

During my last year of college, I almost sold out to my stomach for a credit card. Good thing I didn't because I didn't know anything about plastic, and I don't think most students do either. But brewing legislation in New Jersey is trying to change that.

It was an arctic February afternoon, and I was slogging through the black remnants of week-old snow toward Neff Hall at the University of Missouri. I wasn't particularly hungry; in fact, I was thinking about how last night's meal of energy drinks and beer soda pop left me surprisingly content. However, before reaching refuge inside a classroom, I saw in large, bold letters: "Free Food." It was determined I needed to be tardy so I could investigate.

The deal was this: I would sign up for a credit card in exchange for 6 inches of dough, cheese and tomato sauce. I filled out the form with a false name, address and Social Security number, and then handed it over with a feeling of guilt that was outweighed by the feeling of starvation. Then she asked me for my driver's license to make sure the info matched.

I ran.

Big deal. No lousy pizza for me. I just couldn't bring myself to sign up for a credit card to get something that costs less than 50 cents to make. According to the U.S. Public Interest Research Group, 76 percent of students have stopped at a table on campus to consider applying for a credit card. So, they'll find another sucker. Maybe if they offered to pay the bill for a couple months or something I would have done it. I also thought about the bigger picture: Does offering credit cards on campus offer too much temptation to students who are unprepared to handle the responsibility?

According to policymakers in New Jersey, yes. On Feb. 2, 2008, the state's Senate Commerce Committee unanimously approved the Buono bill, which would regulate how credit card issuers solicit on college campuses. The bill, sponsored by Sen. Barbara Buono, would also require issuers to offer classes on how to use credit responsibly.

"The free water bottle or T-shirt being offered at a table in the Student Center is going to come as very little consolation when you're staring down a credit card bill in the thousands," Sen. Buono said in a statement. "Promotional sales gimmicks and students' own ignorance about the factors playing into their personal credit and credit card debt result in many young adults getting in way over their heads."

N.J. bill details
At the heart of the Buono bill is a credit literacy program that issuers would have to provide to college students. It would include:

• An explanation of the consequences of defaulting and how interest is computed on unpaid balances.
• A discussion of different interest rates, including introductory rates and when a higher interest rate would take effect.
• Information on what happens when a cardholder only pays the minimum.
• An overview of credit-related terms.
• Discussion on wise uses of credit and the consequences of irresponsible credit card use.

The bill would also:

• Require issuers to register annually with the college before they solicit students.
• Prohibit the issuing of a credit card to a student without a record that shows the student completed the provided credit program.
• Forbid solicitors from purchasing the names and addresses of enrolled students from the college;
• Ban the practice of offering gifts or other incentives to students to entice them to apply for a credit card.

The legislation comes on the heels of a recent, similar idea promoted by Illinois State Treasurer Alexi Giannoulias.

Limited legislative success
If passed, New Jersey would join a short list of states restricting card issuers' campus activities. In May 2007, Oklahoma Gov. Brad Henry signed a measure into law that bars the names and addresses of the state's college students from being sold to card marketers. Later in 2007, California Gov. Arnold Schwarzenegger signed the College Student Credit Protection Act, which requires colleges to disclose marketing arrangements they have with banks and financial institutions that offer credit cards on those campuses. It also prohibits issuers from offering gifts to solicit students into filling out an application. In September 2007, a Texas law went into effect that beefs up college officials' abilities to restrict on-campus card marketing, and to require those that do market to offer financial literacy information.

Legislation on the federal level has had even less success. New York Rep. Louise M. Slaughter and Tennessee Rep. John J. Duncan have introduced the Student Credit Card Protection Act every year since 1999, but have been unable to get it passed. The act would limit a student's line of credit, require creditors to obtain a proof of income, income history and credit history from college students before approving any card application and would require parents to agree in writing to all increases in the credit limit of cards they co-signed.

More colleges offer information
Many colleges offer classes on how to handle debt, such as personal finance or consumer economics courses. However, those classes carry all the fees and responsibilities a regular class carries. Plus, they aren't that attractive to students who are looking for flashier course work, such as advanced quantum physics.

But according to study after study, students need more education about credit cards. A 2007 survey by Nellie Mae, a Sallie Mae student loan company, found that 93 percent of graduate students would have liked more info on how to manage their finances. After all, the average credit card debt a college student has after graduation is a little over $8,200, according to the same survey. Also, a study by the Student Public Interest Research Group found that college students' credit card balances have risen 134 percent in the past 10 years.

The Buono bill is now set to move to the full Senate. Whether the senators will be bribed not to pass it with pizza and T-shirts is yet to be seen.

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This article is included in the 51st edition of the Money Hacks Carnival hosted by Your Money Relationship. The carnival is centered around characters from the NBC show The Office. Check it out for some laughs and great reads.

See related: Student credit card bribery, Survey: Grad students' credit card debt averages $8,216, Top 10 ways students ruin their credit, Florida State: We have met the credit card monster and he is us, Student credit card issuers under investigation, More colleges offer courses in money, debt management