CARD Act changes student credit card laws

The Credit Card Accountability, Responsibility, and Disclosure Act, or CARD Act, passed by Congress last year, is starting to take effect at last. Among the many changes brought about by this act will be new rules for student credit cards that students will discover this fall. One of the most obvious changes will be that students wishing to apply for a credit card must now have parental permission. The application will require a parent or guardian's signature if the student is under 21, and the parent/guardian must assert that the student has an independent income to pay off his or her credit card bills. In exchange, however, credit card companies will not be able to try to collect outstanding debts from parents, unless the parents specifically agree to be partially responsible for payments owed.

Credit card companies will also be limited in how they can market cards to students. For example, gone are the days where banks could set up tables on campus with free Frisbees and trinkets for students; marketing on campus and promotional materials are now extremely restricted. Additionally, whereas in the past, students moving into dorms received alumni-backed special credit card offers as one of their first mail deliveries, any credit card offers mailed to target students must clearly state the nature of the relationship between the credit card issuer and the school or alumni organization whose name appears on the offer.

Although their presence on college campuses will be limited, card issuing banks will have to provide a bit of education on their own under the new laws. If these issuers wish to engage in limited marketing at the college itself, they will be required to provide informative programs to students about "responsible use of credit," as well as complete and clear explanations of the penalties of late payments on balances.

The consequences of violating the CARD Act can cost card issuers dearly. Each infraction of the law will net the offending bank between $5,000 and $10,000 in fines.

-Seth Berger