Why the CARD Act of 2009 Isn't Working
NEW YORK ( MainStreet) It was dubbed a "game changer" for college students vulnerable to aggressive credit card marketing. President Barack Obama's 2009 Credit Cart Accountability Responsibility and Disclosure Act (the CARD Act) was, in part, supposed to stop credit card companies from luring students to sign up with freebies. But with Class of 2013 graduates averaging $3,000 in credit card debt on top of more than $30,000 in college-related debt, the CARD act clearly isn't having the intended effect.
Not too long ago it wasn't just timetables, triple vodkas and free condoms freshmen were greeted with upon their arrival on campus. University freshmen were also faced with a myriad of credit card offers, offering enticing "freebies," such as T-shirts and pizzas, if they signed up for a credit card. With the prospect of free pizza, beer and a source of revenue in case financial times got really bad, only the wisest, and perhaps better off, of students refrained from falling victim to such offers. Consumer advocates objected to the credit card companies' aggressive marketing tactics aimed at students, arguing it encouraged them to take on debt.
Designed to assuage student debt
The objective of the CARD Act was to prevent such on-campus marketing techniques from occurring. Under the Act, issuers were also prohibited from issuing credit cards to anyone under the age of 21 unless they could provide proof the applicant earned enough to pay the debt off.
In February 2014, the Government Accountability Office (GAO) published a report concluding that credit card marketing at universities and colleges throughout the U.S. had decreased and, in some cases, dried up altogether. The research also found that in 2013 there had been a significant reduction in the number of students receiving a credit card through a direct mail campaign. The GAO study found five out of nine major credit card companies said they no longer "actively market" their cards to students.
Credit card companies still targeting students
On the surface, the CARD Act seems to work in alleviating student debt. Yet, the GAO research conflicts with the findings of a study compiled by the University of Houston. A study by the University of Houston Law Center's Professor Jim Hawkins revealed that despite strict regulations, credit card companies still heavily target college students. In what was the first empirical assessment of the effectiveness of the CARD Act on young consumers, the research showed students still received tangible gifts and pre-screened mail offers from credit card companies. Not only this, but the 2012 study also revealed many young students are still qualifying for credit cards without demonstrating they earn enough to pay of the debt.
Has so much changed in the spate of the two years between the two studies that students are not forced to make the sensible move and refrain from the freebies and financial "freedom" the credit cards promise?