In the past few years, a number of laws have been passed to help protect consumers from carrying more credit card debt than they can afford. But one group that was supposed to have been specifically safeguarded might not be receivingthe security intended.
Young adults under the age of 21 were supposed to see their protections increased under the Credit Card Accountability, Responsibility and Disclosure Act, but it seems that hasn't entirely been the case, according to a new study from Professor Jim Hawkins of the University of Houston Law Center. Among the findings of the study are that 68 percent of college students under the age of 21 have received direct credit card offers in their own name by mail in the past 12 months, and 40 percent reported seeing college students given gifts in return for signing up for credit cards, though this practice is expressly prohibited by the Credit CARD Act. Further, 27 percent of those under 21 said they were able to list their student loans as income in an attempt to qualify for a card in their own name without a co-signer.
Another area of concern the study highlighted was the relationship between colleges or associated groups and lenders, the report said. Hawkins examined 300 such marketing agreements from both 2009 and 2010 and found that about 64 percent of these documents were unchanged from one year to the next despite the Credit CARD Act taking effect early in 2010. Many of these deals were terminated, but only two specifically listed the regulation as the reason for it being shut down.
"If Congress was concerned about people under 21 receiving credit card offers in the mail, it could directly prevent that conduct by making it illegal to mail anyone under 21 a credit card offer," Hawkins said. "Similarly, if Congress was concerned about abusive terms in the agreements between credit card companies and colleges, it could directly forbid those abusive terms instead of just requiring companies disclose the agreements."
Consumer advocates have noted that credit cards can be particularly troublesome for college students because it might prevent them from being able to gain financial independence after graduation, and could lead to their needing significant debt relief down the road.