The Credit Card Accountability Responsibility and Disclosure Act of 2009 goes into effect Feb. 22, and will have new restrictions on anyone under the age of 21.
Underage cardholders will now have to get permission from the parent, guardian or spouse on their joint account to increase the credit limit on their card.
It will also prevent credit card companies from setting up 1,000 yards within campus and offering gifts to students as an incentive to get them to apply for a credit card.
"Over the past 10 to 15 years credit card issuers have aggressively courted college students through direct mail and on-campus marketing efforts," said Ben Woosley, director of marketing and consumer research at CreditCards.com. "The result has been a significant credit card debt load for those in college. And the concern that carrying this debt beyond graduation has been an unfair burden placed on younger students."
While the bill becomes effective Feb. 22, it was passed with acclaim in
May 2009. "Many of our card members enjoy the fact that they can give their college-age student a card under their account and still maintain control of keeping their student out of debt," said Defiree Fish, spokesperson for American Express.
Whitehouse represen-
tatives said protecting cardholders from debt is part of President Obama's agenda.
"Financial reform was an important part of the president's new agenda," Woosley said. "So there was momentum and political will to get the Credit CARD Act drafted, passed and signed into law in the past year." The suffering economy is another motivation for financial revisions.
"The economy has hurt credit card issuers in two main ways," Woosley said. "The high unemployment rate has caused credit losses to more than double and consumers are spending less on their credit cards." Fish said portions of the bill are instrumental in helping joint account holders control what the card is used for.
"For parents, it is all about managing financial control," Fish said. "So the person that has the card does not spend more than what is in their means."
The bill gave banks a nine-month window to raise interest rates before the law becomes effective.
Increases in interest rates have helped card issuers' revenue, Woosley said, but after the law goes into effect, the card issuers will only be able to raise rates on future purchases.
"Card issuers know that offering free incentives drives application behavior toward just getting the free item," Woosley said. "Lawmakers wanted to remove this enticement from on-campus marketing and allow students to decide based on the merits of the card offer rather than the desire for a gift item."
In MasterCard's case, cards are issued by the bank in MasterCard's name, but the company does offer card responsibility courses to younger cardholders.
"For more than a decade, MasterCard has run a campus-based peer-topeer financial education program called 'Are You Credit Wise?'" said Sharon Gamsin, spokesperson for MasterCard, "which aims at helping college students understand sound financial management."
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