You asked what Connecticut could do to prevent credit card companies from soliciting business from college students. You also wanted to know what other states are doing.

SUMMARY

Regulators and consumers are paying increased attention to credit card companies' attempts to solicit business from college students. Some consider this a form of "subprime lending," in which credit providers look to prey upon the weakest members of society, often elderly, young, and uneducated people. Those concerned about the credit card companies' activities point out that (1) college students are often unaware of the consequences of bad credit, (2) credit card companies charge students high interest rates, and (3) the companies offer students incentives to sign up for cards. These students often graduate owing more in credit card debt than in student loans, or relying on their parents to pay off their credit card debt. Constitutional issues may limit states' ability to ban entirely credit card solicitation of certain groups, but some states have proposed and enacted legislation that protects college students and their parents from predatory credit card issuers.

CONNECTICUT'S OPTIONS

For Connecticut to prohibit credit card companies from soliciting business from college students could violate the U. S. Constitution and other federal laws. Bill Nahas of the Banking Department says it might run afoul of the Commerce Clause in Article I by restricting companies' ability to transact business with a certain class of people. Regulating credit card companies' ability to communicate with specific groups could conflict with the free speech clause of the First Amendment. It might also be considered extraterritorial regulation for Connecticut to prohibit banks in other states from extending credit to Connecticut residents. John Haines of the state Attorney General's Office predicts that regulating credit transactions would almost certainly result in a lawsuit from the major credit card companies.

OTHER STATES

In June 2001, the federal General Accounting Office (GAO) issued a consumer finance report entitled "College Students and Credit Cards. " In an appendix to this report, GAO outlined state legislation concerning credit card solicitation at colleges and universities from 1999 through mid-2001. Many states have found success in regulating credit card companies' ability to solicit business from college students by controlling the conditions of solicitation and mandating certain behavior from the institutions of higher education. Some states have passed laws and many more introduced related legislation. The most common practices in the statutes and proposals are:

1. banning the use of incentives and gifts to entice students to apply for credit cards;

2. prohibiting credit card issuers from pursuing debt collection against a student's parent or guardian unless the parent or guardian gave written consent to be held liable for the student's credit card debt;

3. requiring written parental consent before credit card companies may solicit or issue credit cards to students;

4. requiring credit card companies to register with colleges and universities before soliciting on campus;

5. requiring colleges and universities or credit card companies to provide debt education materials and programs to students; and

6. prohibiting higher education institutions from providing student information to credit card issuers for compensation.

Some states included additional requirements in their bills to afford college students greater protection.

Arkansas

A 1999 Arkansas law requires universities to provide a credit seminar during freshman orientation if they allow credit card companies to solicit at athletic events.

Delaware

The Delaware Senate introduced a bill in April 2001 that would prohibit credit card companies from soliciting credit cards or other loan products on the campuses of state-funded Delaware colleges and universities. Another Senate bill that year prohibited credit card companies from issuing a credit card or loan product with a credit limit or loan amount over $ 2,500 to a person under age 21 unless the person could show sufficient income for the limit or the person's parent or guardian co-signed for the account. Neither bill made it out of committee.

Louisiana

Louisiana enacted several statutes during its 1999 session that regulate credit card solicitation. One law prohibits colleges and universities from (1) allowing distribution of solicitations, advertisements, applications, or information about consumer credit cards to undergraduate students during registration for classes; (2) allowing their employees to distribute such information to students at any time; or (3) providing information on any student to a credit issuer for compensation. Another law calls for the House Committee on Commerce to study the practicability of additional regulations on credit card companies' ability to solicit business from college students.

New Jersey

A Senate bill introduced during the 2000-01 session would have required credit card companies to fund financial management programs for institutions of higher education that enter into agreements for the direct solicitation of credit cards to their students. If a student did not successfully complete the financial management program before entering into a credit card agreement from the direct solicitation, the student would not be liable for any interest on the debt.

An Assembly bill from the prior year would have prohibited public institutions from entering into any agreement or permitting any of their agents or student organizations to enter into agreements for the direct merchandising of credit cards to students. Both bills died in committee.

Tennessee

Two Tennessee bills introduced in February 2001 would have prohibited credit card issuers from recruiting student customers on campus, at college or university facilities, or through student organizations. The bills further required institutions to report annually to the Joint Oversight Committee on Education any funds or percentages received from the distribution of credit cards to students or any percentage collected from the use of credit cards bearing the school logo, as well as how such funds were spent. The bills have been indefinitely postponed.

Washington

A bill introduced in the Washington Senate in February 2001 prohibited issuing credit cards to people under age 21 without (1) a written application, including the applicant's statement of all existing available credit; (2) such credit listed by source and amount; and (3) the applicant qualifying for credit under reasonable and prudent industry standard. A credit card company's failure to comply with these requirements would constitute an affirmative defense to the collection of debt the student incurred by using the card or credit issued. The bill also prohibited credit card issuers from offering gifts for the completion of credit card applications, except for educational material on the responsible use of credit. No action was taken on this bill.

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