Thursday, February 25, 2010

Murphy Credit Card Plan Enacted

Almost a year ago Congressman Patrick Murphy introduced a bill, HR 2217, that would:

amend the Truth in Lending Act to require creditors to report the terms and conditions of all business, marketing, promotional agreements and college affinity card agreements with institutions of higher education and alumni organizations, and for other purposes

Those of you who have been in college may remember all those credit card offers that were tucked in the bookstore bags with your textbooks or handed out on campus like (and often with) candy. Unfortunately that is one factor in the amount of debt that college students get at graduation.

The language of Murphy's bill was folded into the Credit CARD Act of 2009 (see section 303) which passed and went into effect this week. The information in this report will be made public, as noted in "Once secret credit card-college marketing deals to be revealed," by Jay McDonald:
By that date [2/22/10], card companies that contract with colleges and universities to issue affinity credit cards emblazoned with school logos and campus images must submit a report to the Federal Reserve detailing the terms of those contracts by institution. The Fed will then compile a report and make it publicly available.

As noted in a press release from Murphy's office:
As you may know, college credit card debt has skyrocketed in recent years. According to a 2009 study by Sallie Mae, college seniors are graduating with an average credit card debt of more than $4,100, up from $2,900 almost four years ago, and the average college student has over 4 different credit cards. What is not as readily known are the often lucrative deals that colleges make with credit card companies. Through these deals, universities receive large cash payments from companies in exchange for handing over their students’ personally identifiable information (i.e. permanent addresses, e-mail addresses and local telephone numbers). The companies then use this information to directly target students, who are often unaware of the terms and conditions of these deals.

The regulations that went into effect on Monday provide much needed transparency on this issue. Now, schools are required to either place these contracts on their website, or make them available upon request and within a reasonable time frame. Congressman Murphy is urging students and their families to request these documents from their schools so that they have better knowledge of the business practices that schools may be engaging in at their expense.

These college credit reports, like college crime reports, may not be requested by individual students, the availability of the information means that the data will show up in college rankings, news reports, and, hopefully, encourage colleges and universities to clean up their acts. The good ones will put their policies in recruiting materials. Knowing that educated consumers (parents and students) can ask about the topic will make the credit environment a little cleaner.

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