Congress takes aim at credit cards and college students

WASHINGTON — Credit card companies beware: Congress is watching.

A flurry of bills is in the works in the House of Representatives and the Senate that would rein in how those companies do business. One proposed change that's triggered interest among lawmakers, particularly as the economy sours, would make it harder for college students to qualify for credit cards.

"It really is just too easy," said Christine Lindstrom, the director of the Higher Education Project at the nonpartisan Public Interest Research Group. "They will do anything to be the first card in college students' wallets. They don't do credit checks. They don't even know if students have income."

Companies often set up booths on college campuses and entice students with freebies such as T-shirts, sports caps, coupons for food and more, all in exchange for filling out an application.

Brett Thurman, a student government president at the University of Illinois at Chicago, told a congressional hearing last month that he walked into a restaurant near campus last fall and saw four laptop computers set up to process credit card applications.

A free sandwich was the reward.

"Students are poor, so applying for a credit card with a $2,000 credit limit is like winning the lottery for us," Klassie Alcine, a student leader at the University of Missouri in Kansas City, said in an e-mail. "So they end up getting between 4-10 credit cards without blinking an eye."

Alcine said she received about five credit card offers every week.

Some companies have strict rules about signing up college students and make a strong effort to educate them about financial management.

A spokesman for the American Bankers Association couldn't be reached for comment.

Kenneth Clayton, a credit card official with the group, told lawmakers at last month's hearing that while some students aren't responsible about their finances, most manage their credit card obligations well.

"Restricting access to this form of credit would result in great financial hardship for most card-holding college students and their families," he said.

However, that's just what two Missouri Democrats, Rep. Emanuel Cleaver and Sen. Claire McCaskill, hope to do. They've each worked in their respective chambers on legislation to tighten the rules.

Under their measures, students without jobs or the written approval of parents or guardians would have to be at least 21 before they could qualify for credit cards.

"You cannot sign up students who have no source of income," Cleaver said. "If you do, parents or some co-signer would have to guarantee that bill would be paid."

McCaskill proposed her legislation last year; Cleaver, more recently. Both are hopeful that their ideas will be included in the overall credit-card bill that Congress develops. That probably won't be until next year.

How widespread is credit card use among college students? How much are they in debt?

Pick your study.

According to a recent report from Student Monitor, a national syndicated market-research survey, 41 percent of college students have credit cards. Of them, 65 percent pay their entire bills every month. The average balance for those who don't is $452.

Meanwhile, Demos, a nonpartisan public-policy group, found in a report this year that the average credit card debt among college students ages 18-24 increased 11 percent from 1989 to 2004. Nearly 20 percent were in "debt hardship," up from 12 percent in 1989.

Nick Bennett, a 19-year-old sophomore at Missouri State University, said he owed about $800 on his credit card. He's slowly paying it off by working at a sporting goods store this summer.

Even with the debt, Bennett said the card was a lifesaver.

"I wouldn't be able to pay frat dues or pay for books," he said.

But if students such as Bennett aren't that concerned, some people on Capitol Hill are, especially with the turmoil in the lending industry.

"No one should get a credit card that has not demonstrated creditworthiness," McCaskill said. "The reason these kids are all getting the credit cards is because the credit card companies know that if the kids get into trouble, their parents, in all likelihood, will bail them out."