College has always been a heart-warming introduction to the harsh realities of the world for young adults. A stroll through any campus dormitory will turn up roves of students huddled over cheap pizzas and bowls of ramen noodles as they mull over the difficult decision of whether or not to take advantage of the special on Milwaukee’s Best at the tavern on the east side or Miller High Life on the west side.
Being broke is a fact of life for most college students. I remember one particularly generous dorm-mate who regularly donated his coveted AB plasma and platelets to the local Red Cross to fund his evenings on the town. Unfortunately for a large number of college students, this fact of life often triggers financial irresponsibility in the form of accumulating credit card debt. Today, even the most-well-rounded students face a similar fate as the costs of books, supplies and other necessities of student life rise at impressive rates.
With credit card debt rising for college students around the country, many have shifted their attention to the credit card companies, which have doused campuses with offers of free merchandise such as t-shirts, hats and even meals in some instances in exchange for a completed credit card application. A 2008 study by the U.S. Public Interest Research Group Education Fund (USPIRG) found that students receive an average of five mail solicitations and four phone call solicitations from credit card companies each month. The same report noted that approximately 66% of college students have at least one credit card, with many students possessing up to five.
Particularly concerning to critics are the relationships credit card companies are establishing with universities around the country. Credit companies use these relationships to vie for the student market share in a variety of ways. The USPIRG report says such practices include paying student organizations to rent table space in student unions, “branding” college credit cards with school logos for which the university receives compensation, purchasing student information, buying exclusive campus rights and striking deals with alumni associations, which in turn pressure students to use particular credit cards to pay their college expenses.1 The University of Tennessee recently entered into a contract worth $16.5 million over seven years that provided FirstUSA with exclusive on-campus marketing rights and access to the student and alumni names and addresses.2
Why are college students uniquely targeted by these promotions? The USPIRG report notes that credit companies have realized that credit cards acquired by college students have the greatest potential of becoming “top of the wallet” cards, meaning students hold onto their first credit cards for longer periods of time than most other credit cards acquired over their lifetimes. Consequently, credit card companies relish the opportunity to achieve such status with their cards.
Even Congress has chimed in on the issue. U.S. Rep. George Miller, chairman of the House Education and Labor Committee, recently commented that the USPIRG report “shows the extent to which credit card companies are using aggressive marketing tactics to take advantage of college students faced with increasing prices for tuition, textbooks and other college-related expenses.”
Concern over such practices has spurred government action in some states. An October 2007 Business Week article reported that “California, Oklahoma, and Texas recently passed laws restricting credit card marketing on public campuses, joining 15 other states that already had such restrictions in place. In California, credit card marketers can’t lure students with free gifts; in Oklahoma, colleges can no longer sell student information for credit card marketing purposes; and in Texas, on-campus credit card marketing was curtailed, permitting marketing only on limited days and in certain locations.”3
If that wasn’t enough for credit card companies, they are now facing lawsuits over their campus practices. Last year, Ohio Attorney General Marc Dann filed a lawsuit against Citibank for deceptive practices related to a promotion in which Ohio State University students were offered free food by several local restaurants in exchange for filling out credit card applications.4 The lawsuit settled last spring.
However, Dann issued a press release in conjunction with USPIRG forecasting the future of similar litigation. In it, Dann stated, “If the credit card industry continues to exploit young consumers, we will continue to file more lawsuits, like the one we filed against Citibank and their marketing company to stop lenders from luring vulnerable college students into a debt trap with high rate, high fee credit cards.”5
In New York, Attorney General Andrew Cuomo has launched an investigation into “whether credit card marketers have offered payments or other incentives to colleges in exchange for exclusive access to the institutions’ students.” Cuomo, notorious for his investigations of relationships between credit card companies and educational institutions, has already issued subpoenas to Dartmouth University.6
With more and more states passing legislation restricting credit card practices on college campuses, one should expect such lawsuits to increase over time.7 The Washington Legislature has addressed this issue with RCW § 28B.10.618, which states:
(2) Institutions of higher education shall each develop official credit card marketing policies. The process of development of these policies must include consideration of student comments. The official credit card marketing policies must, at a minimum, include consideration of and decisions regarding:
(a) The registration of credit card marketers;
(b) Limitations on the times and locations of credit card marketing; and
(c) Prohibitions on material inducements to complete a credit card application unless the student has been provided credit card debt education literature, which includes, but is not limited to, brochures of written or electronic information.
The law also requires credit card marketers “to inform students about good credit management practices through programs developed in concert with the institution of higher education.”
All signs suggest this will continue to be a prominent issue on campuses across the nation as new laws are enacted, spurring new lawsuits. Unfortunately for critics of credit card companies, these actions seem to have little effect. The USPIRG report notes “the blatant disregard of university policy that occurs” and comments that “the desire to tap into the college student market appears to outweigh any concern for the welfare of the students.”8
Thomas M. O'Toole, Ph.D., is a consultant with Tsongas Litigation Consulting in Seattle. He may be reached at 206-382-2121 or through the firm's website: www.tsongas.com.
1 United States Public Interest Research Group Education Fund, “The campus credit card trap: A survey of college students and credit card marketing,” March 2008.
2 Creola Johnson, “Maxed out college students: A call to limit credit card solicitations on college campuses,” N.Y.U. Journal of Legislation and Public Policy, Vol. 8, p. 191, 2005.
3 Jessica Silver-Greenberg, “Selling Students into Credit-Card Debt,” Business Week, 1 October, 2007.
4 Tracy Turner, “Potbelly will settle ‘free lunch’ lawsuit,” The Columbus Dispatch, 12 March, 2008
5 USPIRG Federation of State PIRGs, “Students support fair campus credit card marketing principles,” 27 March, 2008 at http://www.ag.state.oh.us/press/08/03/pr080327.pdf.
6 Jonathan Glater, “Inquiry into bank practices,” The New York Times, 1 March, 2008.
7 Supra, note 1.
8 Supra, note 1.
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