Bill would limit college credit-card offers

Credit-card companies would be required to tell potential customers about the dangers of debt before issuing credit cards on college campuses under a bill moving through the New Jersey Legislature.

Sponsored by State Sen. Barbara Buono (D., Middlesex), the bill also would put an end to the use of incentives to entice students to sign up for cards.

The bill "enables students who are solicited on campus to make an educated and fully informed decision," Buono said. "A 19- or 20-year-old encountering a carnival atmosphere on campus bloated with marketing tactics like free T-shirts is at a disadvantage. Kids are susceptible to these marketing strategies."

Under the proposal, credit-card companies would be required to register with colleges once a year before visiting campuses in search of new customers.

Buono said the bill would force companies to provide students with an educational program that explained spikes in interest rates on unpaid balances, exactly how long it would take to pay off certain balances by paying only the minimum payment each month, and other general lessons on responsible credit-card use.

If the bill is signed into law, creditors would not be able to sign up students for new cards unless they had a certificate proving the students had completed the education program. The measure was approved unanimously by the State Commerce Committee on Feb. 3 and moves next to the full Senate.

"[The program] raises the likelihood that students will absorb the risks that are inherent with any kind of debt that they'll take on, but there is no absolute guarantee," Buono said.

She said the only absolute guarantee would be to ban creditors from campuses, which she was not willing to suggest. While researching the specifics of the bill, she said, she discovered that 15 other states had introduced legislation to bar companies from soliciting on campuses or to restrict the way they promote their services.

Asked what kind of response to her bill she had received from lenders, Buono said they "weren't thrilled with it."

"None of them were pleased with it, but I worked with them and we worked on language to make it very clear what their responsibilities were," she said. "This has been around for a while. I think they knew that I was going to prevail eventually."

Peter Garuccio, a spokesman for the American Bankers Association, a trade group, said bankers recognized that applying for a credit card might be college students' first experience with banks.

"They want it to be a positive one, the start of a potentially lifelong relationship with that bank. Therefore, they have a vested interested in ensuring ongoing customer satisfaction," Garuccio said.

He added that many college students have families and work part- or full-time jobs. He said that 18-year-olds can vote, get married, and serve in combat, and "from the industry's perspective, we think that they are also entitled or deserve access to credit."

Campus officials praised the legislation for recognizing debt as a serious problem for college students.

"I think it is absolutely important that all of us, including our students, appreciate the danger of excessive personal debt," said R. Barbara Gitenstein, president of the College of New Jersey. "Surely, there are good reasons to borrow money; however, every individual must understand that there are trade-offs and that it would be wise to take on debt that he or she can manage responsibly."

Rowan University spokesman Joe Cardona said: "It's great legislation. It's important.

"The temptation of credit cards is a problem college students face. We know they can become a big problem for some of the students," he said.

Rowan administrators banned credit-card companies from soliciting on campus more than a decade ago, Cardona said.

According to reports from the Center for the New American Dream, a group that says its mission is "to help Americans consume responsibly," more than half of U.S. college students will have signed up for at least four credit cards by the time they graduate.

"We need to give kids the facts before they exacerbate their own personal financial dilemmas," Buono said. "We can no longer encourage 'buy now, pay later' finances, and must seek a better model to insulate future generations from the mistakes which have played a big part in our current economic downturn."

Some college students were insulted by the idea of having to attend a class to register for a credit card.

"I get a lot of credit-card offers, but I don't think it should be mandatory to have to go for educational seminars," said Jessica Berg, a junior political science major at the College of New Jersey. "If you are in college and old enough to make decisions about your future, then you should be able to make the decision on whether or not you can handle a credit card."

Berg has four credit cards but said she didn't have an outstanding balance on any of them.

But one student said she realized how much trouble credit-card debt could cause.

"I don't have any credit cards. This way I don't collect any debt," said Megan Rowan, a senior psychology major at the College of New Jersey. "I figure if I don't have the money for it now, I won't later."