Credit cards on campus

Lenders have been targeting students for years - now it's PIRG's turn

By: David O'Donnell

Posted: 11/17/08

It began with the battle over your wallet: banks and their surrogates popping up on college campuses, at events like our own HuskieFest, vying to get their plastic into students' hands.

Tactics ranged from low, low introductory rates (asterisks included) to handing out clothing and even iPods in exchange for completed credit card applications.

Now, it's the battle over the battle, with consumer advocates labeling such practices as "predatory", and urging new behavior from both card issuers and consumers. The fight to reign in this lucrative market was the subject of hearings on Capitol Hill over the summer.

This winter, it's making its way to USM.

The Maine chapter of Public Interest Policy Research Group - or PIRG - is currently training student volunteers and interns to help spread its national "Truth About Credit" campaign across the Portland and Gorham campuses. The group has been aggressively pushing the issue nationally since March, when it issued the results of a 1,500-student survey that spanned 40 colleges in 14 states.

Among the revelations? Two-thirds had at least one credit card; fifty percent used them on a daily basis. And 25 percent said they had used credit cards to pay a portion of their tuition.

"The biggest focus right now is those 18 or 19 year olds," says Josh Rennie, a student intern at Maine PIRG who is heading up the campaign. "A lot of them don't really know what they're signing up for."

Another stat gleaned from the study was that 86% of those surveyed felt that the Government needed to regulate the marketing of cards to students - a number, PIRG says, that implies enough young people have come away feeling burned.

Offering powerful dissent is the American Bankers Association, which also testified before Congress at the June hearing. First and foremost, the group takes issue with the notion that a certain segment of adults needs protection from simple marketing.

"A lot of students are 21 years of age or over have part-time jobs," says ABA Spokesman Peter Garuccio. "Even when you are talking about 18 yr old college students, you're talking about people who have the right to vote, join the military, and get married."

"Entering into a contractual obligation for a credit card is something we should avail to them," he adds, also pointing out that cards are an early entry point to the kind of credit history needed to obtain auto and home loans later in life.

Joel Gold is a professor of economics at USM, and he concurs with that central industry line.

"When I think of predatory, I think of something really evil," he says. "Fact is, when you're 18, at least in most states, you're not a minor anymore. You make your own decisions."

However, Gold points out, it is generally accepted that college students 21 or younger are less emotionally mature. It's no accident that banks put so much marketing muscle into such clusters of new consumers.

And a lack of oversight has played no small role.

"There has been a lot of practice where credit card companies and banks give students credit card after credit card - without any coordinated effort," he says. "Student could have 10, 20 credit cards and debts on each one."

A study by student loan firm Nellie Mae in 2004 found that, of the 76 percent of undergraduates who had credit cards, the average debt racked up was approximately $2,169.

Rennie admits that the problem sometimes rests with the young cardholders, who may not take time to read all the "fine print" of their contracts. But PIRG feels that unmanageable credit card debt effects students disproportionately enough to warrant stricter rules - like a ban on offering gifts for applications, or the sponsorship of student groups in exchange for contact lists.

Another measure would constrict the banks' ability to change interest rates and terms of contracts, which can be adjusted by the card issuer based on a cardholder's failure to pay bills - even those unrelated to the credit card.

"You always hear the horror stories of people getting charged for things they didn't realize existed," Rennie says.

But ultimately, the group feels that the most important step they can take is informing young people about the risks, before they trade their signature for a Sigg bottle. This semester, Maine PIRG is teaming up with USM's Office of Early Student success to hold Question and Answer forums. Based on those sessions, the group hopes to publish a personal finance guide aimed at local students.

It is also soliciting stories from some of those who have mounted significant debt already, so that their experiences can be recorded and shared.

© Copyright 2009 Free Press