It used to be that the Freshman 15 referred to the 15 extra pounds freshmen put on when they left home for college. These days the Freshman 15 is as likely to refer to the $15,000 in debt college students can accumulate in no time.
In an effort to curtail the temptation for college students who may lack financial literacy skills, New York Attorney General Andrew Cuomo has launched a statewide investigation into deceptive credit card marketing practices that target college students through their colleges.
Cuomo has sent letters to every college and university in New York requesting that the schools submit any exclusive contracts they currently have with credit and debit card companies so that his office can examine them for problematic marketing practices. The letters also call on the schools to adopt policies that will help students avoid getting saddled with credit card debt before their graduation.
Cuomo has already investigated conflicts of interest in the student lending industry, which led to nationwide reforms. Like student loans, credit cards are a major cause of students increasing debt burdens. Cumom says banks and credit card companies target students in part because they are less financially savvy and more likely to incur fees and penalties that result in substantial profits for credit card companies.
Mountain of debt
Todays students are facing a growing mountain of debt that can burden them long after graduation, Cuomo said. As a new school year begins, we want to make sure that colleges and universities are doing all that they can to help students avoid financial dangers. Especially in this difficult economy, schools must ensure that credit card companies are not engaging in deceptive marketing practices and jeopardizing the futures of their students.
The Attorney Generals investigation concerns deceptive credit card marketing practices that have targeted students, such as: Schools have given marketers their students personal contact information - without students permission - to allow companies to solicit students by mail, telephone, and online.
Credit card companies have bombarded students with solicitations at student centers, athletic events, orientations, classroom buildings, and other campus locations.
Credit card companies pay schools for the exclusive right to market cards to their students and to brand cards with their insignia. Schools have entered into these deals without evaluating if the terms of the cards are in their students best interests and without a competitive bidding process.
Selling out students?
Some schools have had a provision in their contracts with credit card companies that provide the schools with a percentage of the finance charges assessed to certain credit card accounts.
Companies have lured students by providing free gifts and food when they applied for a credit card.
As part of the investigation, Attorney General Cuomo has sent
letters to the approximately 300 colleges and universities in New York
calling on the schools to:
• Submit any exclusive contracts they currently have with credit and debit card companies for an evaluation by his office. The Attorney Generals office will review the contracts for any problematic practices that put students at risk.
• Ensure that their practices comply with the provisions of a 2009 federal law, the Credit Card Accountability, Responsibility, and Disclosure Act (the Credit CARD Act), which provides new protections to college students from deceptive credit card marketing practices and unfair credit card terms, and other recent changes in federal law concerning debit cards.
• Educate their students about the serious consequences of credit card debt by offering financial literacy programs. Many college students do not understand the negative effects that late payments will have on their credit history or the far-reaching problems that a poor credit history can cause.
Cuomo cites figures showing the average college student graduates with nearly $4,100 in credit card debt, on top of an average of $20,000 in loans for students at four-year colleges. This combined debt burden can be overwhelming for new graduates, he says, particularly as they face the uncertainties of todays difficult economic climate.
He says credit card debt has been found to slow students progress toward obtaining a college degree, as some students become forced to drop out of college and obtain full-time employment to meet their debt obligations. High-interest credit card debt limits graduates career choices and threatens students employment prospects, since many employers check applicants credit scores during the hiring process.
