October 16, 2007

Bill to Limit Credit Card Solicitation on U.S. Campuses

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Banks and credit card companies will no longer be permitted to use merchandise giveaways to entice college students to apply for credit cards at public universities in California if a bill passed by the State legislature in September is signed into law by Gov. Arnold Schwarzenegger (R).
In recent years, several states, including New York, and some individual schools have enacted similar policies in response to a national trend of college students accruing thousands of dollars of credit card debt by the time they graduate.
Before credit card companies can advertise on campus, the New York education law requires colleges to have a written credit card marketing policy that features a program to educate students about credit usage. John Gutenberger, director of Cornell’s community relations department, said that the University is currently reviewing its policies regarding credit card solicitors. He does not believe that the policies in place are going to change.
“We don’t want to allow private marketers on our tax-exempt land,” said Gutenberger.
In the past, certain exceptions were given for limited times and locations to marketers who sought permission through the University. These companies were not restricted from giving out gifts to students who applied for a credit card.
“Companies can get pretty innovative with gimmicks to get at this demographic, but we’re doing our best to keep them at bay,” said Gutenberger. “We’d get word of non-authorized marketers on campus from time to time and have to politely ask them to leave.”
According to an article in USA Today, banks and credit card companies look to attract students because they are the one demographic sector that has not already been over-saturated with credit card application requests. Additionally, students are attractive customers because they tend to remain loyal to whichever company issues them their first card. However, consumer protection groups, such as the U.S. Public Interest Research Group, have alleged that these companies target college students because young people lack significant financial experience, making them especially prone to incurring interest fees and overages. In 2004, the average undergraduate student had a credit debt of $2,169, a problem that may also be compounded by college students’ use of credit cards to pay back their student loans.
Such figures have compelled lawmakers to pass legislation making it more difficult for credit card companies to solicit on college campuses via ploys such as giving out free food, t-shirts or frisbees to students who apply for credit cards.
At schools that have prohibited marketers from campus entirely, the companies have legally avoided this restriction by setting up credit card application booths directly across the street from campus, particularly in areas that are heavily trafficked by students, according to USA Today. In addition, credit card companies have gained access to campuses that have banned marketing by sponsoring seminars on financial knowledge at which credit card applications are handed out. Not all colleges have attempted to prevent credit card companies from marketing to students. Some of the largest public universities in the country have received payments of millions of dollars annually from banks in return for the exclusive right to solicit students to apply for credit cards, according to USA Today.
Michelle Kremer ’11 said she has not experienced any difficulties meeting her monthly credit card payments since arriving at Cornell. However, she considers it an unfair practice that her bank charges such a high interest fee on cash she takes from her credit account because the transaction is considered a “minor loan.”
“And that’s on top of the $2 ATM charge,” said Kremer.
Last week, student activists from PIRG began a campaign to disseminate information on college campuses about the exploitative practices of credit card companies. The group even mimicked one of the companies’ tactics, distributing free lollipops that read, “don’t be a sucker” to students who took an information pamphlet. Advocacy groups hope that by raising awareness about the aggressive methods banks use to attract college students to credit, it will pressure the banks to amend their practices. Despite the fact that most incoming college students lack income and have not established a credit history, credit card companies are willing to sign up students, even those who have outstanding balances on another credit card. According to USA Today, approximately 40 percent of college students have four or more credit cards.