Giannoulias cracks down on campus credit cards

Bill would prohibit campus giveaways; selling of student names
In what has become a national trend, some credit card companies and banks are luring cash-strapped college students with gifts, such as T-shirts, backpacks and food, into applying for credit cards with low-teaser rates.

In addition, colleges, universities, foundations and alumni associations affiliates are entering into agreements with banks worth millions of dollars to exclusively promote their affinity credit cards to students and alumni. These agreements, which are often considered confidential, allow credit lenders access to personal information that enables them to target students directly by mail, phone or email.

"As college students head back to school, they're bombarded by credit card companies offering freebies if they sign up for a card," said Giannoulias, noting that these promotions come during a time when college costs, such as tuition, books and room and board are rising at record rates. "This is a troubling trend that can have tragic results as debt piles up.

"These aggressive and in some cases predatory practices are often aimed at students, who have never had any serious financial obligations," Giannoulias said. "It creates a perfect storm when you consider many financially strapped students don't have a steady source of income and are more concerned with current costs than dealing with their long-term debt."

Student loan lender Nellie Mae conducted a student survey in 2005 that showed 76 percent of all undergraduate students had at least one credit card. However, by their senior year, 56 percent of undergrads carried four or more credit cards with an average balance of nearly $3,000 on top of student loans.

"Credit card companies unfairly target college students and will do anything to pile on the debt," said Brian Imus, State Director with Illinois PIRG. "The proposed legislation is a critical step toward putting an end to out-of-control marketing and unfair practices by the credit card industry on Illinois campuses."

Giannoulias' legislation applies to all Illinois colleges, universities and their affiliates. It would:

  • Ban credit issuers from offering any gifts when marketing credit cards on campuses;
  • Prohibit the selling or transferring of student names and personal information by colleges, universities, their foundations and alumni associations to credit card lenders;
  • Call on state colleges, universities and their affiliates to disclose marketing agreements with banks that target students;
  • Require colleges and universities to conduct financial literacy education for freshmen if the schools allow marketing or advertising of credit cards to undergrads.
Violators of any of the provisions would face a misdemeanor charge and a fine of up to $1,000.

"This legislation is in the best interest of students and would go a long way toward limiting the debt that many of them accumulate," Giannoulias said.

Giannoulias' bill would also close the so-called "sandwich loophole" that card issuers have exploited to entice students with gifts at colleges that already prohibit credit card companies from soliciting on campus. At the University of Illinois at Chicago, marketers handed out sandwich coupons to students on campus that could only be redeemed if they filled out a credit card application at an off-campus sandwich shop. The legislation would ban the distributions of such redeemable coupons on state campuses.

"You don't have to be a finance major to see how credit card companies make money on these deals," said Brett Thurman, student government president at UIC. "Students say on the applications that they have no income. The companies are hoping students spend three years floating a decent sized balance until they get a job and can pay it off. Who knows how much they just spend on interest."

Joanna Zahn, a senior at the University of Illinois Champaign-Urbana, said she tried to outsmart a credit card company that offered her a free Subway sandwich meal in exchange for her application.

"I gave the credit card company fake information, a made-up address and the wrong Social Security number," Zahn said. "I never got the card, but it did show up on my credit report and could affect my credit score. All they needed was my name."

ISU senior Alison Haacke lives off-campus and receives credit card solicitations at least once a week in her mailbox. The 20 year old doesn't know how the companies got her name, but she doesn't appreciate the constant solicitations.

"I hate it. It goes right in my shredded pile. If I wanted a credit card, I could find it myself," Haacke said.

Haacke's roommate, 21-year-old Molly Gleason said she applied for a credit card on campus because a friend had to collect a certain number of applications as a fund-raiser for his fraternity. She took a free t-shirt as a thank you gift, but destroyed the card when it came to her in the mail.

"I don't like it, I did it as a favor to a friend, otherwise I wouldn't have done it," Gleason said.

State Sen. Donne Trotter and State Rep. Kevin Joyce will sponsor Giannoulias' bill and introduce it when the Illinois General Assembly convenes in January.

"I am proud to work with Treasurer Giannoulias to ensure that Illinois colleges will not profit from their students' debt," Trotter said. "Students deserve to learn without being preyed upon by credit card companies."

"It is time for Illinois to curb the credit card hustle that leaves college students with thousands of dollars in debt before they've even graduated or joined the workforce," Joyce added.

In announcing his initiative, Giannoulias stressed that the legislation does not prohibit students from applying for credit cards or establishing credit before they graduate and start earning an income.

"Credit cards are essential in building credit and are needed for emergencies," Giannoulias said. "We want those young credit card holders to be responsible and shop around for the best interest rate, and we're confident they can do that without a free slice of pizza."

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