State Senator Thomas P. Gaffey
December 1, 2008
On-Campus Predatory Lending Must Be Stopped
A column from the Meriden Record-Journal by Senator Thomas Gaffey
The cause of the floundering global economy can be traced to bad credit worth billions of dollars that accumulated, was artificially inflated, and then repeatedly repackaged and resold until it became undeniable that there were insufficient funds to sustain the financial house of cards.
I intend to prevent something comparable from jeopardizing the personal finances of Connecticut college students in the legislative session beginning next month.
For many years banks have stalked college campuses with hopes of preying upon unsuspecting and sometimes naïve students there with applications for credit cards and lines of credit. I have long considered this a form of predatory lending with little regard for long-term consequences, similar to the explosion of easy-to-get home mortgages in recent years that led directly to the default and foreclosure implosion this year.
I will introduce a bill early in the session to restrict access to Connecticut’s college students and protect them from overeager and sometimes unscrupulous lenders.
Several factors prompt an urgent need for such restrictions, including the relative inexperience of first-time credit card users and their unfamiliarity with the consequences of bad credit. In addition, many credit card companies offer enticing incentives to artificially lure first-time borrowers but then charge high interest rates, citing a lack of credit history among young people.
More disturbing are recent reports about how credit lines are automatically increased when students reliably pay the minimum amount due each month — suggesting an ongoing willingness and ability to pay on their part — when in fact a college student usually has only a modest income, if any at all, and very rarely the increased earnings to justify higher credit limits.
Far too often, students rack up charges with an eye on how much is allowed, continue to pay the minimum monthly amount, and then wonder how they ‘suddenly’ wound up in so much debt.
Dozens of other states are working to address the issue and Connecticut must join them. For example, Tennessee enacted a law earlier this year banning credit card companies from on-campus solicitation. According to published reports, freshmen there were offered free food, clothing, and accessories when they registered for a card, but given insufficient notice about the responsibilities of credit card debt and consequences for falling behind with payments.
Similarly, California lawmakers passed a bill last year banning such on-campus giveaways at public universities there. New York law requires colleges to have a written policy governing credit card marketing that must include a program to teach students about managing credit. And likewise, lawmakers in West Virginia recently considered a bill to regulate on-campus credit card solicitation and penalize violations of those regulations.
To protect Connecticut college students from inadvertently getting into more debt then they’re capable of repaying, I will introduce a bill in January with these provisions:
- Required registration by soliciting credit card companies on each campus
- No more enticements or incentives to lure students to apply for credit cards
- Mandatory parental permission to be included in a student’s application
- Indemnification of parents from liability for students’ indebtedness
- Mandatory debt education to be provided for students
- Formal policies by colleges/universities to govern credit card solicitations
- Absolutely no dissemination or sale of student information to credit card companies by either the school, its foundation, or alumni association
We are living with the wrenching results of lax credit policies and will likely endure their dispiriting economic consequences for years. This new law will help young college students avoid the same fate.
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