Bauer Business Focus

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Jim Hawkins | February 18, 2011

Published on February 18, 2011

UH law professor Jim Hawkins says the Credit CARD Act of 2009 hasn’t been effective in preventing university students from accumulating credit card debt.

On Bauer Business Focus – A conversation on the credit card marketing to college students with Andrew Schneider, business reporter for KUHF 88.7 FM.

The Credit CARD Act of 2009 was intended to make it more difficult for credit card companies to market to college students, but according to University of Houston law professor Jim Hawkins, that’s not exactly happening.

Hawkins, who recently completed a study of UH students to determine the effectiveness of the act, stopped by Bauer Business Focus to discuss how certain loopholes may be allowing credit card companies to continue to solicit college students.

The act had provisions to limit the ability of applicants under 21 to be approved for cards — now, they must show proof of income or assets to pay off debt, or have a co-signer. The act also limited marketing capabilities for credit card companies to give free gifts, like T-shirts, to students on college campuses if they fill out an application.

“It turns out, it doesn’t seem that there’s been much effect at all,” Hawkins said. Of the students he surveyed, 76 percent of those under 21 said they’ve received a credit card offer in the mail since the start of 2010, when the act went into effect.

“The rate is alarmingly high,” he said. Although the act prevents credit card companies from using credit card bureau data to pull student lists, they may now be using other means to get contact information of university students to send mailings, Hawkins said.

The provision that applicants provide proof of income or assets has also been problematic, he added. “The rules of ‘income and assets’ are so broad,” Hawkins said. “What was shocking to me, in my study, was that almost 30 percent said they used student loans as assets to qualify for a credit card.”

“It’s such an inroad around the law,” he said. “They’re using debt to show they can pay off other debt.”

Hawkins said he plans to continue to research the issue and will next interview credit card issuers to understand the business end of the study.

Click here to hear the full interview.

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