Graduating
Into Debt: Credit Card Marketing
Executive
Summary
Not
long ago, credit cards were reserved for those who could prove
that they had the income and self-discipline to manage credit. A
college student could not obtain a credit card unless a parent
co-signed.
In
the past 10 years, the stereotype of the financially struggling
student has been replaced by the image of the credit card wielding
student who wants for nothing. Credit cards have given students
financial freedom—freedom to purchase clothes, electronic
equipment, and exotic spring vacations. But many question whether
that freedom has come at too high a price—increased bankruptcy
filings among young adults, students being forced to drop out of
school because of debt, and students graduating and starting life
with a high debt load.
Complaints
from students and parents in Maryland spurred several state
legislators to introduce legislation to address credit card
marketing to students.1 No legislation
was enacted, and the hearings that were held to consider the
legislation left unanswered questions about the extent of credit
card marketing on Maryland public campuses and the policies, if
any, of public colleges and universities regarding credit card
solicitation.
This
report addresses those unanswered questions, including:
•
What type of credit card marketing occurs on Maryland campuses?
•
Do schools have policies in place to prohibit or limit credit card
marketing to students?
•
Do schools sell their students’ personal information to credit
card issuers?
•
Do colleges provide any education to students about the proper use
of credit cards?
The
results of this survey show that credit card marketing varies
widely among Maryland colleges and universities. Some schools
prohibit credit card marketing on campus, some allow marketing
with certain restrictions, and others have no restrictions.
Specific findings include:
•
Credit card vendors are setting up tables on some campuses in
violation of university policies prohibiting or limiting tabling.
•
At least two schools currently sell their student lists (names,
addresses and telephone numbers) to credit card issuers.
•
Several schools have exclusive marketing agreements with one
credit card issuer for which they receive financial compensation.
•
Only one school that allows on-campus marketing has a
comprehensive written policy specifically governing credit card
marketing.
•
A few schools teach students about credit card use and personal
finance as part of student orientation.
•
Most education about credit cards and personal finance provided by
schools is voluntary and few students attend.
We
recommend the following actions be taken in order to address the
problems and issues raised by credit card marketing to college
students.
•
Colleges and universities in Maryland should establish specific
written policies with the input of students, parents and
administrators on credit card marketing to students.
•
Colleges and universities should be prohibited from selling
students’ personal information to commercial entities.
•
Colleges and universities should provide credit card education as
a required part of freshman orientation. The education should be
provided by university personnel or by an independent source, not
a credit card issuer.
•
Personal finance education should be a graduation requirement for
all Maryland high school seniors.
•
Credit card issuers and universities should crack down on
unauthorized marketing on college campuses.
•
Credit card issuers should adopt more conservative lending
policies for college students and should place reasonable credit
limits on accounts based on students’ income.
•
Congress should enact a national interest rate cap for credit
cards, require higher minimum payments, require disclosure of the
length of time it will take to pay off an account if only the
minimum payment is made, place limits on late fees and penalty
interest rates, and prohibit penalty interest rates for late
payments to other creditors.2
Notes
1
See page 15 of report for discussion of legislation introduced in
Maryland.
2
These reforms cannot be enacted by the states because of federal
preemption of many state laws regulating banks. Demos: A Network
of Ideas and Action, Borrowing to Make Ends Meet, The Growth of
Credit Card Debt in the ‘90’s, Sept. 2003, New York, New
York, p.33 to 35.
