Certain provisions of the Credit Card Accountability, Responsibility and Disclosure Act state that financial institutions may not send preapproved accounts to consumers under the age of 25. But, despite this, many lenders are still mailing college students offers of this type, according to a reportfrom the Wall Street Journal.
A new study by professor Jim Hawkins at the University of Houston Law Center found that, of the more than 300 undergraduates surveyed, about 76 percent of those under the age of 21 said they received a preapproved credit card offer in 2010, the report said. In addition, 73 percent said they have seen credit cards marketed to students off-campus during the academic year.
The relationship credit card lenders have with college students has recently become a focal point for lawmakers, the report said. Many universities were recently revealed to have agreements with financial institutions that give them a certain percentage of the credit card debt incurred on university-branded accounts in exchange for marketing rights to the campus. As a result, schools are now required to disclose any such contracts they may have with lenders.
About a third of all freshmen already had a credit card when they arrived on campus, the report said. Another 29 percent of those under 21 who had gotten an account since school began said they listed their student loans as income in order to qualify.
Under the Credit CARD Act, anyone who is not yet 21 that applies for a credit card must either have an adult co-sign on the account or else prove that they have sufficient income to cover the cost of any credit card debt they incur. By listing their student loans as income, many young adults are successfully circumventing this protection.
However, when it came to paying their credit card debt, 64 percent of students said they planned to do so themselves, while 21 percent said they would expect someone else to pay it, the report said.
Many consumers now graduate from college with thousands of dollars in credit card debt spread across a number of accounts.