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Does the CARD Act protect college kids from abusive lending tactics?

A number of consumer protection laws are aimed at protecting Americans for predatory lending practices. Congress passed the Credit Card Accountability, Responsibility and Disclosure Act to address issues that could harm some people financially.

The CARD Act includes provisions to protect college students and other young adults from certain predatory lending practices. Many consumer advocates say that too many young college graduates face financial distress and may need to find debt relief at a young age.

Some Ohio college students, like anywhere in the country, have historically faced serious debt issues while still in college. While working toward paving their way to a future, credit card debt has brought financial distress for many at an early age.

The CARD Act intended to add protections for America's youth. But a recent study, out of the University of Houston Law Center, says that many practices prohibited under the Credit Card Act continue, despite passage of the consumer protection law.

The study reveals that 68 percent of college students under the age of 21 have received direct credit card solicitations in the mail in the student's own name over the course of the past 12 months. A whopping 40 percent of the study participants say that they have seen college kids receive gifts after agreeing to open a credit card account, a practice expressly prohibited under the consumer protection law.

What is more, the academic study found that roughly 27 percent of college students under the age of 21 said that they were allowed to list student loan money as income when applying for a credit card.

The Credit CARD Act also addressed marketing agreements between our nation's colleges and financial institutions. The study looked at roughly 300 marketing agreements between colleges and lenders from 2009 and 2010.

The Credit CARD Act took effect early in 2010, and a comparison of the pre-CARD Act and post-CARD Act agreements revealed that many of the agreements had not changed. Many of the deals were reportedly cancelled at some point, but only two of the cancelled deals listed the Credit CARD Act as the reason the agreements had been terminated.

The author of the study asserts that the protections in the CARD Act are too indirect. He says that the law does not expressly prohibit soliciting young people in the mail--it just makes the process more difficult. "If Congress was concerned about people under 21 receiving credit card offers in the mail, it could directly prevent that conduct by making it illegal to mail anyone under 21 a credit card offer," he says.

He also asserts that Congress does not appear sufficiently concerned with the college marketing agreements. He says that abusive terms in the agreements could be directly prohibited instead of merely requiring that the agreements be disclosed as under the CARD Act.

Source: University of Houston Law Center, "Credit card companies still heavily targeting college students despite strict regulations," April 24, 2012

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