New federal law makes it tougher for young adults to obtain credit cards

Revisions to the Truth in Lending Act, signed into law July 2009, will make it more difficult for people under the age of 21 to obtain a credit card.

Samer Forzley, vice president of marketing for eBillme, a company that offers a cash payment option for online purchases, summarized three key points of reform for the law, which will take effect Feb. 2010.

First, people under the age of 21 must have a cosigner be 21 years old or older. This could be a spouse or parent. Second, proof of income must be shown to demonstrate that what is borrowed can be paid back. Finally, the person applying for the credit card must go through an educational process to learn how to manage debt.

In past years, Whitworth provided debt education to students. Traci Stensland, associate director of financial aid, used to offer credit responsibly courses, but students didn't take advantage of it said Dayna Coleman-Jones, assistant dean of students.

"Two years ago we held financial literacy sessions with dinners. One of the topics was on credit card debt, but that was the least attended session," Stensland said. "When I talked with students to find out why they didn't attend, they said they didn't have credit cards."

Credit card companies were allowed to advertise to a greater degree on Whitworth's campus in past years. Jones said Whitworth used to allow various companies to come and set up tables at the beginning of school.

"We stopped doing it because we felt like if we were going to offer credit cards we needed to offer educational opportunities along with it," Jones said. "My policy for the HUB is no one can advertise on campus unless it is some kind of educational offering," Jones said.

Stensland commented on the concern that comes with allowing credit card companies to advertise on campus.

"Statistics show 18-year-olds really don't understand credit," Stensland said. "They may abuse credit and get themselves into unnecessary debt when they are also trying to achieve higher education. If a student is already struggling financially, that could hinder their ability to stay in school."

Forzley said the average college student graduates with $4,000 in credit card debt. He stated that this new law should help decrease college student debt.

"For the short term, college students will graduate with less debt," Forzley said. "In the long term, they will learn how to better manage money."

Stensland commented that without doing a survey to find out how many students have credit cards, it's hard to say what the impact of the new law will be on Whitworth students.

"I don't think the law is necessarily a bad thing as you're trying to juggle higher education costs like financial aid and student loans," Stensland said.

Contact Rachel Bair at rachel.bair@whitworthian.com.

1 comments

Megan B

Tue Dec 15 2009 18:56

It's hard enough to build credit as it is. These new regulations have good intentions, but will cause unnecessary harm. Since a good chunk of your credit report comes from having at least one long-standing account, only students with rich mommies and daddies who are willing to co-sign will have this advantage. Aka: the children of upper-class families will have a credit advantage when it comes to buying cars and their first house, etc. As an independent student without parents, I would have found such a situation very frustrating and unfair. Life is hard enough for those of us without co-signers without adding the ability to build a credit history on top of that.

What would make more sense would be limiting credit limits. If student cards were kept under $500 each and students were limited to only, say, 3 credit card accounts, that would solve the problem. If they max out all of their cards, they would only be $1500 (or less) in debt. After they turn 21, the credit card companies could then begin to raise their limits as they see fit biased on the activity of the previous three or so years.

Finally, the 21 rule on alcohol drinking makes sense. It is applied because of scientific, biological reasons having to do with one's brain and liver developing enough to handle the substance. Applying the same restriction to obtaining a credit card is age discrimination, plain and simple. If they can do it, so could car insurance companies, so could banks limit on those who can open checking accounts, etc. Not all of us have parents we can depend on before and/or after adulthood. It's hard enough to manage independently while trying to get started as it is.

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