Lawmakers Approve Bill To Protect College Students From Credit Card Companies

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TRENTON – A bill to strengthen regulation and consumer protections for students who sign up for credit cards on college campuses received final legislative approval by a vote of 58-18 during the Assembly Voting Session on June 18.

The legislation creates new requirements creditors must satisfy in order to solicit on college campuses including providing a mandatory educational program on the responsible use of credit to undergraduate students, prohibiting credit card companies from offering promotional giveaways, and increasing colleges’ oversight of credit card solicitors.

“This legislation will empower students to make fully informed and educated decisions before embarking upon what can be a life altering decision to open a credit card and accumulate debt.  Credit scores have the potential to affect a person’s ability to obtain car insurance, employment, apartment rentals, home mortgages, and all other future borrowing,” said Senator Barbara Buono (D-Middlesex). “Given the very serious impact of a credit score on a student’s future prosperity, success, and well-being, it’s time for New Jersey to join other states in cracking down on credit card companies’ sales gimmicks, and unconscionable lending practices.

“As a nation we know all too well the consequences of borrowing beyond our means and the buy-now pay later mentality.  These practices can lead to personal ruin and were a precipitating factor in the national economic meltdown,” Buono, a sponsor of the bill, added.

The bill would require credit card issuers to annually register with an institution of higher education before soliciting students on-campus with credit card offers.  The credit card issuer would be required to provide to undergraduate students an educational program on responsible credit card use, which would include:

· A full explanation of the consequences of not paying off credit card balances in full within the time specified on the billing statement, including an explanation of how interest is computed on unpaid balances;

· An explanation on how long it would take to pay off certain hypothetical balances by only paying the minimum monthly payment;

· A full explanation of the differences between an introductory interest rate and an ongoing interest rate, including the exact time when the higher ongoing interest rate takes effect;

· An explanation on credit-related terms;

· And a discussion on the generally accepted prudent uses of credit and the consequences of imprudent credit card use.

In addition, the bill would prohibit credit card solicitors from issuing a credit card to a student without a certificate that the student completed the credit education course.  And finally, the bill would prohibit solicitors from purchasing or otherwise obtaining the names and addresses of enrolled students from the institution of higher education, or offering gifts or other promotional incentives to students in order to entice them to apply for a credit card.

“On college campuses around the state, it’s typical to see tables of free giveaways, such as food and beverages, key chains, backpacks, and personalized college tee-shirts, which are set up to lure students into signing up for a credit card,” said Buono.  “Since creditors often require a student to sign up on the spot in order to receive the giveaway, this carnival like atmosphere makes it easier for students to ignore the credit contract’s fine print, teaser interest rates, and other fees.”

According to a 2007 CBS News report, almost one-third of high school seniors and more than three quarters of college freshmen have already accumulated credit card debt.  The Center for the New American Dream found that over half of all college students carry four or more credit cards by the time they leave school. Buono noted that this trend is likely to increase, particularly as the current economic conditions make it harder for students to receive loans or other financial assistance to help pay for college.  Nearly one third of all states already restrict or ban credit-card marketing to students on campuses.

“This legislation is about ensuring that the next generation doesn’t have to learn the hard way about the long-term consequences of credit debt.  As a state we must find opportunity in the tough lessons of the current economic crisis.  I hope the silver lining of this cloud is that our children will have the knowledge needed to avoid making the same mistakes which contributed to the current economic recession,” said Buono.

The bill now heads to the Governor to be signed into law.


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