Generation of College Students Will Avoid Credit Card Debt Due to CARD Act, GAO Finds

Press Release

Congresswoman Carolyn Maloney (D-NY) says a new study from the Government Accountability Office is further proof that the Credit Card Accountability Responsibility and Disclosure Act reforms she authored are working. The GAO report released Monday found that credit card companies have significantly curtailed their marketing of credit cards to college students.

"An entire generation of college students will avoid unfair and sometimes predatory credit card debt as a result of the CARD Act," said Maloney. "These GAO findings follow a report released in late 2013, which showed that American consumers save $20 billion each year as a direct result of these reforms. For years, some of the largest banks aggressively pushed teaser-rate cards to cash-strapped students in the hopes of racking up thousands in interest payments and fees. This new report shows that gravy train is grinding to a halt."

In 2009, the CARD Act changed the marketing and terms and conditions of credit cards for young people, requiring additional consumer protections and disclosures for students and consumers under the age of 21. For instance, any new credit card application for someone under 21 must contain either (1) a co-signer over 21 who has the ability to make payments on the debts from the account and who will be jointly liable for debts incurred by the applicant until he or she is age 21, or (2) supporting information showing that the applicant would have the independent ability to make payments on any debt incurred from the use of the card (an "ability to pay"); Among other provisions, the act requires that:

* Co-signers of such accounts approve increased credit lines until the cardholder is 21;

* Card issuers not obtain a credit report for someone under 21 to use to make an unsolicited prescreened credit offer; and

* Card issuers and creditors not offer a student any tangible item to induce the student to apply for or participate in a credit card on or near the campus of the institution of higher education or at an event sponsored by or related to an institution of higher education.

The Act also requires that credit card issuers submit to CFPB each year the terms and conditions of any college affinity credit card agreement between the issuer and an institution of higher education or an affiliated organization in effect at any time during the preceding calendar year.

In addition to a copy of any college credit card agreement to which the issuer was a party, issuers also must submit summary information for each agreement, such as the number of cardholders covered with accounts open at year-end (regardless of when the account was opened) and the payments made by the issuer to the institution or organization during the year. CFPB must submit to Congress, and make available to the public, an annual report that contains the information submitted by the card issuers to CFPB.

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