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New Credit Card Law Brings Changes for Young Adults
The Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act) limits credit card companies’ access to young adults. Legislation regarding how credit card companies can market to young adults became effective Feb. 22, 2010. In short, these changes limit the marketing and issuing of credit cards to young adults.
Here are the details:
- Anyone younger than 21 years of age must be an authorized user on a parent’s account. To have their own card, individuals must show proof of adequate income to pay card debts, or have an adult co-signer.
- Prescreened offers to consumers under 21 are banned.
- Card companies are banned from offering free gifts for completion of an application on or near a college campus and at college-sponsored activities/events.
- Colleges, universities, and alumni associations must disclose details of contracts they sign allowing credit card marketers access to student and alumni contact info.
- Card issuers must file reports annually with the Federal Reserve Board listing all business/marketing/promotional deals with schools. These reports must detail the terms and conditions, list schools by name, and identify how much the issuer is paying the school.
Mike Schenk, vice president of economics and statistics at the Credit Union National Association, Madison, Wis., says the legislation will be good for overall credit use among young adults. "The new legislation will lead to better money management, to young people being more careful about carrying balances and paying off balances on time," Schenk says.
Kelli Grant, senior consumer reporter for SmartMoney.com, says the new legislation could help protect young consumers from going into debt. For example, credit card issuers have to include a minimum payment disclosure that explains how long it will take to pay off the balance and the total cost in interest fees if you pay only the minimum amount due.
Schenk reminds consumers that credit unions weren’t involved in the deceptive practices that led to the new law, and will not try to trick consumers into high interest rates or unfair payments. "What young adults will ultimately discover is that credit unions are a good deal," Schenk adds.
If you have any questions on these changes, please call a loan officer at 315-488-4433. |
