Sen. Kohl, Reps. Hintz And Hixson, WISPIRG Advocate Student Credit Card Reform Proposals
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WISPIRG
Madison, WI – U.S. Senator Kohl, Wisconsin State Representative Gordon Hintz, and WISPIRG student leaders today laid out proposals on the UW Madison campus to address rising credit card debt among college students. Participants discussed credit card companies’ aggressive marketing and predatory lending practices that are targeted at students, and outlined proposals to address the problem, including the Credit CARD Act, S.414, co-sponsored by Senator Kohl.
“It was wonderful today to be on campus and hear firsthand from students on the very important issue of credit card protection,” Kohl said. “Protecting students is one of my top priorities and this bill will continue to help students avoid falling into the terrible cycle of credit card debt.”
“It is estimated that 76% of undergraduates nationally have credit cards and the average undergrad leaves school with around $2,200 in credit card debt,” said State Rep. Hintz, who chairs the Assembly Consumer Protection Committee. “As students are inundated with credit card offers on campus, it is important to highlight the pitfalls and provide students with information that allow them to make smart financial decisions. I applaud Senator Kohl for his work on behalf of students and am pleased to join him today to help educate students.”
Near campus, companies offer free gifts to students in exchange for their application for credit. Increasingly the industry is also using increasing interest rates and penalty fees to extract higher profits, even from customers previously in good standing. Higher interest rates lead to higher unpaid balances and create opportunities to extract even greater profits for the credit card companies.
Participants discussed a number of proposals to educate students about credit cards, to work with University leaders to adopt guidelines for credit card companies on campus, and to enact state and federal measures to curb predatory credit card lending practices.
“I am pleased to join Senator Kohl in supporting this important federal measure to protect students from the aggressive tactics used by credit card companies,” said State Rep. Kim Hixson, who serves as Chairman of the Assembly Committee on Colleges and Universities. “As a professor and a parent, I plan to introduce complimentary legislation that would enhance and protect the rights of students as consumers. It is imperative that students are provided with protections that enable them to make sound financial decisions that will not impair them down the road.”
Co-sponsored by Senator Kohl, the Credit Card Accountability Responsibility and Disclosure (CARD) Act would ban a number of practices that credit card issuers have used to unjustifiably increase interest rates, fees and other charges. It passed the Senate Banking Committee last week, moving to the Senate Floor for a final vote.
“The CARD Act recognizes that credit card companies target unsuspecting college students for overpriced credit cards even when they don’t have jobs or an ability to repay,” said Alex Bodaken of WISPIRG. “The bill requires them to treat students like they are supposed to treat other consumers, fairly. WISPIRG thanks Senator Kohl for his leadership on this important bill.”
The Federal Reserve Board issued rules to stop unfair credit card practices, giving the industry until July 1, 2010, to implement the new practices. A number of major card issuers are now increasing fees and interest rates on millions of Americans before the new rules take effect. The House of Representatives passed legislation last year that was similar to the Federal Reserve Rules and is likely to do so again this year.
The Credit CARD Act has a number of protections that extend beyond those of the Federal Reserve rules and House legislation. It requires credit card companies to stop:
o Applying unfair interest rate hikes retroactively to balances incurred under the old rate.
o Hitting consumers with high penalty fees that are not related to the costs that credit card companies incur.
o Assessing hidden and unjustified interest charges on balances already paid off.
o Piling on the debt that consumers owe by requiring them to pay off balances with lower interest rates before those with higher rates.
o Offering credit to students and young consumers without considering their ability to repay the loan.
