8A -Monday, September 21, 2009
The Michigan Daily - michigandaily.com
New rules change how
banks market on campus
From Page 1A
73,000 alumni accounts open
and 1,500 student accounts open,
according to Sigler. So long as the
10-year contract remains in place,
the revenue from these accounts
will remain constant. The legisla-
tion could affect the terms of a pos-
sible future contract, though.
Christine Lindstrom, director
of the Higher Education Project
on debt conducted by the United
States Public Interest Research
Groups, said there are two key pro-
visions within the CARD Act that
will protect students as consum-
ers.
The first condition Lindstrom
highlighted is the issue of tabling
and handing out giveaways in
exchange for opening a credit
account, which will no longer be
permitted on campuses after this
legislation comes into affect. Lind-
strom said that without giveaways,
students will be more focused on
the terms and conditions of the
credit agreements they're signing.
The secoid condition is that
students under the age of 21 must
have a cosigner or be approved via
a financial background check prior
to being approved for a credit card.
Lindstrom said the need for
students to show income or assets
before being able to obtain a credit
card without a cosigner is also a
major component to the new legis-
lation that will enable students to
be educated consumers.
"Previous to this point, students
in college were the only consumers
who weren't held to a standard of
what your income and your assets
are," Lindstrom said. "And based
on your income and your assets, we
will then give you an interest rate
and a credit line, and that basically
is the way it works for every adult
in society except for students."
Another important component
of the legislation that will help
lower student credit card debt is
the opportunity to lower penalty
interest rates over time, Lind-
strom said.
"That's huge andverysignificant
in terms of decreasing debt because
that's not the case now," Lindstrom
said. "By giving the cardholder
some ability to proactively fix the
problems that they had, to get out
from underneath the penalty inter-
est rate, you can lower the debtthat
that person would otherwise face."
Lindstrom said she sees the
necessity of a cosigner as essential
in protecting students from debt
they would otherwise be suscep-
tible to acquiring if there were no
background checks on assets.
"If you're qualifying for credit
that you can't afford, of course
you're plunging yourself into deep-
er debt than you otherwise should
be in," Lindstrom said.
In U.S. PIRG's Campus Credit
Card Trap Study, conducted from
October 2007 to February 2008, 66
percent of students had at least one
credit card. Out of that number, 30
percenthad a cosigner or their par-
ents paid their credit card bill. For
those students who paid their own
credit card bills, 36 percent paid
their bills in full each month, while
34 percent carried a balance.
Peter Garuccio, senior director
of public relations for the American
Bankers Association, said the pro-
visions of the CARD Act are going
to drastically change the nature of
the credit card industry.
"Really when you look at all of
the provisions en masse, in all,
it really requires a new business
model," Garuccio said. "They've
got to change their operations,
they've got to change their market-
ing, they've got to change their risk
assessment, they've got to change
their pricing. They have to change
everything really."
But he added that the effect
the legislation will have on stu-
dents opening credit accounts
remains unclear because the Fed-
eral Reserve hasn't yet established
well-defined guidelines of how
to determine if a student has suf-
ficient income or assets to qualify
for a credit card.
Garuccio said the association
is awaiting a preliminary rule on
those guidelines by the end of the
month and a final rule that will be
adopted by the end of the year.
"Until we know what that looks
like, we don't know what the full
effect is going to be," he said. "But
again, suffice to say it's going to be
tougher for people in this age group
to geta card."
Garuccio said he thinks banks
and universities will still partner
up through affinity agreements
- like the one between the Uni-
versity's Alumni Association and
Bank of America - in the future to
create programs that are mutually
beneficial to each party.
But he said not many students
actually open credit accounts
through campus displays because
programs are geared toward alum-
ni - as is the case with the one at
the University.
Some students said they think
the new legislation requiring
those under 21 years old to have a
cosigner to open a credit account
will protect students from piling
up debt and from overcharging on
items they can't afford.
LSA sophomore Paige Tibbits
said she is waiting to get a credit
card until she is older because she
doesn't want to rely on it to make
payments.
"I kind of agree with that
because if you don't have any
source of income or any way to
pay offa credit card, you could put
yourselfinaserious financial situa-
tion that could potentially damage
your future," she said. "It makes
sense that if you don't have a reli-
able source of income, why should
you have a credit card?"
But some students, like LSA
junior Rachel Rickard,think people
under 21 years old should be able
to open their own credit accounts
without a cosigner.
"To me that seems kind of ridic-
ulous because I don't have a job
during the school year; I only have
a job during the summer," Rickard
said. "And I have a credit card and
I can pay it off."
Rickard said she uses her cred-
it card for certain educational
expenses, like textbooks, in order
to build up her credit history.
"BasicallyIuseitsoIhave estab-
lished credit now, and I never pay
for anything with it that I know
that I don't have the funds to pay
back," she said.
Sweatshop Labor & Codes of Conduct:
from Form to Function
Wednesday September 23, 7:00-9:00pm
Gallery, Hatcher Graduate Library, Rm. 100
Reception to follow
Panelists:
S#, CEO, Knights Apparel
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liz t s. e~edy, Vice President, Corporate
Responsibility, Collegiate Licensing Company
>, President, J. America
. Is there an ethical imperative to effectively implement codes of
conduct?
. If so, what are the strategies and pitfalls of implementation?
Join us for this discussion on issues of aspirational versus
operational codes and on the responsibilitiesof companies versus
Universities in assuring that codes are implemented.
Co-sponsors:
UM CENTER FOR ETHicS IN PUec LIFE
THE UM PRESIDENT'S AVscRY COMMITTEE ON
LABOR STANDARDS AND HUMAN RIGHTS
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