RECOMMENDATIONS FOR COLLEGES
College administrators are starting to show concern about credit card marketing on campus and rising levels of credit card debt. At least two colleges -- Widener College (PA) and Niagara University (NY) have reportedly banned credit card marketing on campus. A recent news article reported that at least one college -- Indiana University -- has made a credit card debt seminar part of new student and parent orientation. "This is a terrible thing," said administrator John Simpson, "We lose more students to credit card debt than academic failure." (The Chicago Tribune, 16 August 1998.
PIRG recommends that college administrators take the following actions:
- Colleges should review the practice of allowing the firms to pay student groups a fee based on the number of applications filled out (rather than, for example, receiving a flat fee for the use of their tabling privilege) since that leads to overly-aggressive marketing. One student, who testified before Congress about her credit card debts, said she got the credit card that got her in trouble only because a fraternity friend said they were planning a keg party with the $1 per application they received.
- Colleges should prohibit credit card companies from offering trinkets to students for filling out applications unless the student has first read a credit card education brochure prepared by either the college or a non-profit credit education organization.
- Colleges should include credit card and debt education materials in brochures inserted in bookstore shopping bags.
- Colleges should review and consider limiting the total number of credit card tables allowed on campus each semester.
- Credit card and debt education and counseling sessions should be made a regular part of campus programming, including new student orientation programs.
RECOMMENDATIONS FOR STUDENTS:
The following is a summary of recommendations for students included in a new PIRG fact sheet
- Consider the risks and benefits of credit card debt, before you apply. Think about the risks, and whether you really need the card.
- One national credit card is all you need to help you build a credit record, if you pay it off on time. You can build a credit record without carrying an unpaid balance.
- If you must carry a balance, always pay as much as you can afford, every month. Never pay only the minimum balance, or you'll have trouble paying down the card.
RECOMMENDATIONS FOR CONGRESS
- Do not enact industry-supported, unbalanced bankruptcy law amendments currently before Congress, which would, among numerous egregious provisions, force bankrupt consumers to pay off more high-cost credit card debt, even in circumstances where the lender made additional, risky loans to unqualified consumers who had already exceeded reasonable debt limits.
- Instead, enact HR 1975 (Joe Kennedy, D-MA), which would strictly regulate the disclosure of introductory teaser interest rates that typically jump from 4.9% or so APR to 17-20% after 3 months. The bill would also prohibit numerous onerous credit practices, including charging consumers who pay off their full balances on time a punitive fee. Such practices encourage carrying high cost credit card debt.
- Require credit card bills to include a monthly calculation describing how long, in years and months, it will take to pay off your credit card if you make their recommended minimum payment, at current interest rates, if you never use the card again.
- Hold hearings on rising levels of student credit card debt. Disappointingly, Congress has not held hearings on the problem since Rep. Joe Kennedy did in 1994, when he chaired the House Subcommittee on Consumer Credit.
- Prohibit the mailing of unsolicited credit cards, even cards that are unactivated. At least one bank, First USA, is exploiting an apparent loophole in the Truth In Lending Act's long-standing prohibition on mailing unsolicited credit cards, by sending out phone cards with an unactivated credit card feature that can be turned on with a phone call.
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