Credit card reform came too late for 20-year-old Tamaira Shaw.
The junior at the University of the District of Columbia got a preapproved credit card from Bank of America in the mail her freshman year of college. It had her name on it and a $500 limit, and she took it as a license to spend. Within three days, she bought a new cellphone, new clothes and new textbooks-and maxed out her card. Her mother is still helping her pay off the balance, plus hundreds of dollars in finance charges and fees.
“They randomly sent it to me,” Shaw recalled this week as she started another semester at UDC. “I was just excited.”
The landmark federal legislation that overhauled the credit card industry is now reaching into college campuses to protect students like Shaw as they return to school and attempt to juggle not only their education and social lives but also how to pay for it all.
The law, which was passed in 2009 and phased in this year, bans issuers from providing credit cards to people under age 21 unless another adult co-signs for it or the student can show an independent source of income. It also prohibits the companies from offering students free gifts, such as T-shirts or pizza, in exchange for signing up for a card on campus or at school events, and college groups are required to make public any partnerships they have with card issuers.
Consumer advocates have long criticized the industry for wooing young people who often don’t realize the risks involved, sucking them into a vicious cycle of debt. “Their goal is to hook you on credit,” Ed Mierzwinski, consumer program director of the advocacy group U.S. PIRG, said of the industry’s business model.
WATCH: NEW CREDIT CARD LAWS GO INTO EFFECT