Monday, October 09, 2006
Bill takes swipe at credit cards luring students
They're in college bookstore bags, hawked with free gifts like basketballs and duffle bags, and tacked by the dozen to campus bulletin boards.
Credit card applications.
Eight out of 10 American undergraduates has at least one credit card, according to a survey by the student-loan company Nellie Mae. And despite what students may tell their parents, the cards are not just for emergencies. Students carry an average monthly balance of $2,327.
Some groups - including many students - argue that banks prey on students, using giveaways and pressure sales to lure credit novices into years of high-interest debt.
Every year for the last six, students and consumer groups have asked state lawmakers to rein in credit card marketing on college campuses. Banks and pro-business lawmakers have managed to quash the proposal every year.
This year looks no different. Freshman Rep. John McCoy, D- Tulalip, is pushing House Bill 1934, to limit credit card pitches in dorms or dining halls, ban free gifts in exchange for filling out an application, and require the companies to host free financial management workshops for students.
Despite support from students at Washington's two largest state universities, however, the bill was attacked by banking lobbyists and several Republican lawmakers.
"Well, if I hear you right, you want us to have a piece of legislation that helps protect you from yourselves. Am I wrong?" Rep. Jim Clements, R-Selah, told student lobbyists from Washington State University and the University of Washington.
A $3,000 credit card debt didn't strike Rep. Cary Condotta, R- Wenatchee, as all that much for a graduating senior.
"Hopefully, most of these kids will start at $40,000 to $50,000- plus," he said, referring to the salaries they might command.
Rep. Don Cox, R-Colfax, said that college students are the best and brightest, and should be able to handle their own financial matters.
"Part of the university experience is to learn how to manage life," he said.
McCoy's response: Debt and bruised credit can follow students for years.
"The overall thing is that we're trying to save the students," he said. "If you screw up on a credit card, that haunts you for a long, long time."
McCoy had originally wanted to flatly ban all credit card solicitation on campus - something that 300 colleges have done nationwide, according to House researcher Sydney Forrester. But that proposal has been watered down, after bank and credit union lobbyists pointed out that the bill would have hamstrung their on-campus branches.
Some students say the marketing is too aggressive. WSU student lobbyist James McMahan said that every fall and spring, about the time that students need to buy books and pay tuition, credit card companies set up booths on campus and offer hats, CD cases and other gifts in exchange for filling out an application. McMahan wants more prominent disclosure of interest rates and fees, and less hawking of freebies.
"We firmly believe in the right of students to receive credit cards," he said. "But we also believe in fair marketing practices."
Condotta told him that life is full of free enticements by businesses.
"Get used to it," he said.
Banking industry lobbyists said their companies play by the state and federal fair-trade rules, and that most students handle credit responsibly.
"We have to remember: these people are adults, and they're capable of making choices," said Gary Gardner, who represents two large credit unions.
The state public colleges, which keep a close eye on legislation and budgets, were silent on the credit card bill. Many bookstores, alumni associations and student groups have contracts with credit card companies, giving them easier access to students and alumni.
"Is there, for lack of a better term, kickback deals?" asked Cox.
"Yes, there are give-and-take relationships, you bet," said Denny Eliason, a lobbyist for the Washington Bankers Association.
Bruce DeFrates, associate vice president for enrollment services at Eastern Washington University, said the school has no way to know how many students get in over their heads in credit-card debt. But he supports the bill.
"Our bookstore manager would probably shoot me if he heard me say that," said DeFrates. "But I think there is a group out there that's easily tempted, and it (the bill) would remove some of that temptation."
In some cases, he said, incoming freshmen arrive already burdened with credit problems.
"They have problems even before they get to us," he said. "As soon as they turn 18, they get hammered (with credit applications) at the malls."
This sidebar appeared with the story:
FAST FACTS
The numbers
Student credit-card statistics:
54 percent of college freshmen have a credit card.
92 percent of sophomores have one.
The average credit card balance for college students is $2,327.
21 percent of undergraduates have high-level balances of $3,000 to $7,000.
Students in the Northeast use credit cards the least; student in the Midwest use them the most.
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