Credit card reform enacted to protect consumers

By Hannah Weiner Features Editor

New credit card regulations signed into law by President Obama late last spring will take effect in February 2010.

The Credit Card Accountability, Responsibility and Disclosure Act of 2009 is designed to end the “unfair practices that trap people in a never-ending cycle of debt,” according to policy counsel for Consumers Union Pam Banks and will make it more difficult for people under 21 to get a credit card.

The new law bans unfair rate increases, prevents unfair fee traps, calls for plain language disclosures and protects students and young people.

“With this bill we are putting in place some common-sense reforms designed to protect consumers,” Obama said at the signing ceremony for the bill. The president added, however, “We’re not going to be giving people a free pass, and we expect consumers to live within their means and pay what they owe.”

Consumers Union, a state and federal nonprofit organization that has advocated for consumer protections since the 1930s, began warning college students in early fall against heightened marketing by credit card companies on campuses.

“It’s open season on campus as credit card companies make one final push for the lucrative student market before new federal protections become law,” said Lauren Zeichner Bowne, staff attorney for Consumers Union. “It might be tempting to sign up for a credit card, but students should make sure they can really afford it and consider other alternatives to building up their credit record. A college education is expensive enough without piling on a mountain of credit-card debt.”

While the new law will protect students who don’t have credit cards, it is not as beneficial for those who are already in credit card debt. City College student Tyler Hausman Carver signed up for a credit card with Wells Fargo in late August when he needed a little extra money. “They started offering me a college Visa credit card when I was still in high school, and I decided to take them up on it after I started college,” Carver said.

The pamphlet the bank sent to him displayed the phrase, “Life’s looking good with your college Visa credit card” and included benefits to opening the card.

“They didn’t have anyone co-sign for me. They didn’t really check to see if I was financially viable. They didn’t even ask me if I had a job.” Carver said. He activated the card, but the bank didn’t send him a spending report. Carver had to go online to see any transactions made with the card.

He looked over the information in the pamphlets the bank provided for him, but still remained unsure exactly how the card worked. “I know there was a $600 limit, but that’s really all I know. I’ve gotten one bill for $16, but I think that sounds a little too good to be true, and I’m a little worried,” Carver said.

On their Web site, Consumers Union provides tips for students looking into getting a credit card, as well as those who already have one. The organization cautioned against being tricked by teaser rates and falling for slick marketing campaigns. The site explained that “credit card companies may offer everything from free college sweatshirts to iPods just to get students to sign up for a card.”

“For now, it’s business as usual,” said Lisa Westermann, assistant vice president of public relations card services and consumer lending at Wells Fargo. “We offer college students a combination of financial-services product.”

One such service is the College Combo Package. “This combination of services is specially designed to help students manage their finances successfully. By focusing on the total banking relationship with the college customer and not just the credit card, Wells Fargo has found that students are more responsible with their finances,” Westermann said.