U.S. House approves credit cardholder protections

The legislation contains regulations designed to protect student borrowers.

By Andrew Denney

Published May 1, 2009

The U.S. House of Representatives passed a resolution last Thursday that would establish safeguards for credit cardholders. The resolution carries an amendment that aims to help prevent college students from getting to deep into debt.

The Credit Cardholders Bill of Rights Act of 2009, which would amend the Truth In Lending Act of 1968, drew overwhelming bipartisan support in the House, with only 69 Republicans and one Democrat voting against the measure. The legislation was sponsored by Rep. Carolyn Maloney, D-N.Y., and had 128 co-sponsors.

The full Missouri Congressional delegation, which is made up of five Republicans and four Democrats, voted in support of the bill. The measure will be sent to the U.S. Senate for approval.

Paul Sloca, spokesman for Rep. Blaine Luetkemeyer, R-Mo., said many concerned constituents from the 9th District, which includes Columbia, had contacted the congressman about the issue.

"You want to protect consumers," Sloca said. "I think that was the nature of the vote."

In a news release, Rep. Russ Carnahan, D-Mo., who is a co-sponsor of the bill, said the legislation is long overdue.

“When so many American families are struggling to make ends meet, consumers who play by the rules deserve to be treated fairly by their credit card companies,” Carnahan said in the release.

The bill would prevent credit card providers from raising their annual interest rate unless certain conditions are met, such as a change in the consumer price index or a late payment by the cardholder. It would also require companies to announce interest rate changes 45 days in advance, prohibit retroactive interest rate increases, restrict credit card companies from marketing and providing cards to borrowers who are under 18 and allow cardholders to set their own credit limits.

In a statement released after the passage of the bill, American Bankers Association President and chief executive Edward Yingling said, while the organization is interested in striking an appropriate balance between consumer protections and the availability of credit for consumers, it still has serious concerns about the passage of the bill.

“As policymakers are aware, it is vitally important to maintain access to credit at this difficult economic time,” Yingling said in the release. “This is especially true for credit cards, which serve as a driver of economic activity and are relied on by consumers and small businesses as a way to bridge short-term financial gaps.”

An amendment proposed by Rep. Louise Slaughter, D-N.Y., prevents companies from issuing cards to college students that have credit limits of up to 20 percent of their annual income. The provision, which applies to full-time, traditional-aged college students, would also limit credit lines for student borrowers without co-signers, require companies to obtain a credit history from a student from students before issuing cards and would limit students with no verifiable income to one credit card.

In a news release, Slaughter said credit card debt could have “serious consequences” for a student’s future.

"If credit card companies applied the same scrutiny to college students as they do to adults when approving them for credit cards, college students would not be maintaining balances that they are incapable of paying," Slaughter said.

According to a survey conducted by student lending giant Sallie Mae, 84 percent of American college undergraduates have credit cards, and on average, students hold an average of 4.6 cards.

The survey also found that, on average, college graduates are entering the workforce with $4,100 in credit card debt, up from $2,900 in 2004. Only 15 percent of college students had a zero credit card balance, a drastic change from 69 percent in 2004.

For years, credit card companies have targeted college students, even coming directly to campus or locations along the periphery and offering credit card applications to students.

According to a report released last year by U.S. Public Interest Research Groups, 76 percent of college students surveyed between October 2007 and February 2008 said they stopped at a table set up by a credit card vendor either on campus or near it, and 31 percent of those in that group were offered free gifts, such as T-shirts, toys or candy.

MU spokesman Christian Basi said that in 2000, the university placed several restrictions on credit card vendors seeking to peddle cards on campus, and soon thereafter he said there was a “significant drop-off” in the presence of such vendors.

Basi said before the regulations were put into place, University Bookstore would place literature from credit card vendors in every bag issued for a purchase. He said that practice was banned by the new regulations at the cost of advertising revenue for the university.

The regulations also restricted vendors from handing out free items to students for filling out credit card applications, limited vendors to just one visit per month to campus and required vendors to post a sign near their display that clearly indicates the introductory and interest rates for the card.