Study finds new laws haven’t prevented marketing cards to college kids

Though Congress passed a law several years ago that prevented credit card lenders from marketing their products to young adults, a new study found the practice is still ongoing.

The Credit Card Accountability, Responsibility and Disclosure Act has largely been skirted by credit card lenders since it took full effect in February 2010, at least as far as the marketing of these accounts to adults under the age of 21 is concerned, according to a new study from Professor Jim Hawkins of the University of Houston Law Center. Hawkins surveyed more than 500 students and reviewed 300 agreements between card issuers and colleges or other associated groups and found that the provisions specifically designed to help young adults from taking on credit card debt haven't had their intended effect.

The study found that 68 percent of those under 21 have received credit card offers in the mail over the past year, and 40 percent said they've seen lenders give gifts to students for signing up for an account, the report said. The law was designed to prohibit both of these practices from taking place, especially by increasing standards for qualification by requiring either an adult co-signer on an account being opened, or asking the youngster to provide adequate proof of income to show they can afford the account.

"Most troubling, students are still qualifying for credit cards without demonstrating an ability to repay the debt," Hawkins said. "My study found that 27 percent of students under 21 who were applying by themselves for credit cards listed loans as part of their income to qualify for the card."

Further, about 64 percent of the agreements between colleges or alumni groups and credit card lenders have not changed in any way since the Credit CARD Act went into effect, though many were terminated altogether, the report said. Hawkins found that only two of the 300 agreements he studied referenced the regulation specifically as the reason for the deal being terminated.

Because college-age adults can still obtain credit cards in their own name, it's important that they do so only after making sure they have their financial standing straightened out. Taking the time to check their credit reports for any unfair markings that might be reducing their creditworthiness can be of the utmost importance when seeking new accounts.