Signed into law on May 22, 2009, most of the provisions in the long overdue Credit Card Accountability Responsibility and Disclosure Act didn’t take effect until February 22, 2010.
The Credit CARD Act contains special provisions for consumers under the age of 21. Among them are:
Prohibition on Issuance
Here is the requlation is legalese:
APPLICATIONS FROM UNDERAGE CONSUMERS.—‘‘(A) PROHIBITION ON ISSUANCE.—No credit card may be issued to, or open end consumer credit plan established by or on behalf of, a consumer who has not attained the age of 21, unless the consumer has submitted a written application to the card issuer that meets the requirements of subparagraph (B).‘‘(B) APPLICATION REQUIREMENTS.— An application to open a credit card account by a consumer who has not attained the age of 21 as of the date of submission of the application shall require—‘‘(i) the signature of a cosigner, including theparent, legal guardian, spouse, or any other individual who has attained the age of 21 having a means to repay debts incurred by the consumer in connection with the account, indicating joint liability for debts incurred by the consumer in connection with the account before the consumer has attained the age of 21; or‘‘(ii) submission by the consumer of financial information, including through an application, indicating an independent means of repaying any obligation arising from the proposed extension of credit in connection with the account.
What this all means is no one under the age of 21 will be issued a credit card except in the following two cases:
- He obtains a co-signer who is at least 21 years old AND willing to accept liability for the underage cardholder’s debt, or
- He must submit proof that he is financially able to repay any debts that he my incur
Also, it is now illegal for credit card issuers to send those annoying (but sometimes tempting) pre-screened credit offers to anyone under the age of 21.
Any college student under the age of 21 must receive their parent’s (or other co-signer’s) permission before securing a credit limit increase from the issuer.
Marketing on College Campuses
- Credit card issuers are now banned from giving away free gifts (tee-shirts, food, etc) to entice people to apply for their cards. This ban is in effect at all college-sponsored events and “near” any college campus. For the record, “near” is defined as within 1,000 feet of the campus borders.
- Congress has urged that each college adopt the following policies/procedures:
- Require the credit card companies to notify the school of the location of all on campus marketing efforts
- Limit the number of locations where this marketing can take place
- Institute credit card and debt education & counseling sessions as a part of the new-student orientation program
- All credit card issuers are required to file an annual report with the Federal Reserve Board outlining all agreements (including promotional, marketing, and financial) they have with colleges and universities
- All college/universities and alumni associations will have to disclose any agreements they have with credit card issuers in which student and alumni contact information is shared
As with the general regulations which I discussed here, I would like to hear your feedback. Do you think these laws do enough to protect our youth? Can/should more be done? Do you feel that they are too restrictive?
Personally, I feel that these restrictions are a good thing given the lack of financial education in this country. However, the true solution is to offer basic financial training as early as grammar or junior high school. Parents and students alike need the resources to make wise decisions regarding financial matters.
I would love to hear what you think in the comments below.
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