The Kiss of Debt

With the Credit Card Holder's Bill of Rights voted out of committee yesterday, the full House goes to vote next week. According to the Speaker's Blog

"The Credit Cardholders’ Bill of Rights protects Americans against the unfair and often abusive practices of credit card companies. Americans should never be subject to excessive credit card fees, sky-high interest rates, and unfair, incomprehensible agreements that credit card companies revise at will. But during a recession, with so many families in economic peril, these practices can be devastating.

This legislation is a departure from an era of government indifference to anti-consumer practices. I commend Congresswoman Carolyn Maloney for her tenacious work on this legislation in the face of continued opposition from corporate interests. I look forward to a strong, bipartisan vote in favor of the Credit Cardholders’ Bill of Rights and to working with the Senate to send this critical pro-consumer legislation to President Obama for his signature into law."

While the economy is in freefall and CEOs are jumping out of windows, Americans are seeking refuge in bankruptcy courts and in the offices of credit counselors across the country. Young people are no different.

What predatory lenders peppering corners with high interest pay-day loans are to the poor, blood sucking credit card companies offering free t-shirts and unlimited cash on campuses are to youth.

In a report this week from the Online News Hour

"According to a study commissioned by Sallie Mae researchers, the average undergraduate carries $3,173 of credit card debt -- the highest level since researchers started collecting data in 1998."

The current legislation includes a section forbidding credit cards to emancipated minors under 18 years old. That's a pretty small community of people, and provides zero protection for students on campuses and new high school graduates. The Online News Hour piece referenced above suggested originally Congress was considering making it harder to issue credit to anyone under 21. The piece also mentions a hardcore lobby effort from the Bankers Association, which is probably the reason for the 21 to 17 and under emancipated youth switcharoo. The partnering Senate Bill The Credit Card Accountability, Responsibility and Disclosure Act (CARD Act) proposed by Sen. Chris Dodd has the 21 year old limit.

The House Bill is a joke. As open as I'm sure so many progressives want to be, lets be realistic. Credit.com reports that a majority of young people begin establishing lines of credit between 18 and 22. They also say that the majority of those 18-22 year olds don't understand how their financial decisions impact their credit.

At the same time

"Credit card companies spend billions of dollars marketing to young people through the Internet, television, phone and old-fashioned brochures in the mail offering pre-approval, low interest rates, and even "free money" if you sign up now.

They are especially aggressive on college campuses, buying lists of students from schools and entering into agreements that allow them to set up tables in front of dining areas and activity fairs.

"They were everywhere...like vultures: outside of my dorm, at football games and in the quad. I took their teddy bears, free pizza, tote bags and complicated, convoluted signup forms," Kali Dun, a University of Virginia student, told a congressional hearing on credit card abuses. "

Many colleges have banned the vultures and some state governments have worked from their level to protect students. Is it so much to ask that the feds do the same?

The Newsletter for the Federal Courts warned, years ago, that young consumers should be wary about credit card companies and their practices.

"Many of the debtors who come into bankruptcy court admit that if someone had warned them about the pitfalls, they would not be in that predicament," said Chief Bankruptcy Judge John Ninfo of the U.S. Bankruptcy Court for the Western District of New York. . .

"It is especially troubling that more and more young people are falling victim to credit card abuse and turning to bankruptcy as a means to relieve their oppressive debts," Chief Judge John Walker of the U.S. Court of Appeals for the Second Circuit added."

I'm grateful for Sen. Dodd's 21 year old cap but I wish both bills would make all public universities a safe haven from credit card companies that pull the rug of financial stability out from under young consumers.